"This Shit Is Getting Scary": Fear and Loathing in Menlo Park

Day 10 of FTC v. Meta Platforms took another look at the WhatsApp buy with Meta COO, Javier Olivan, and then went back to third parties with Apple.

Paranoia, paranoia
Everybody's coming to get me
Just say you never met me
I'm running underground with the moles, digging holes

There’s one line we’ve heard more than any other at this trial, a famous aphorism from former Intel CEO Andy Grove: “Only the paranoid survive.”

It’s a line I first heard from Intel executives when I was part of the team defending Qualcomm in the antitrust suit challenging its business practices brought by an FTC team that included the Commission’s lead lawyer here, Daniel Matheson. (The FTC won that trial but lost its entire case on appeal.) Grove explains the saying in his book of the same name, writing (with my emphasis):

“Business success contains the seeds of its own destruction. The more successful you are, the more people want a chunk of your business and then another chunk and then another until there is nothing left. I believe that the prime responsibility of a manager is to guard constantly against other people’s attacks and to inculcate this guardian attitude in the people under his or her management.”

And Grove’s motto has been a common refrain in the case to break up Meta, invoked by Mark Zuckerberg and again by the witness who took up most of Day 10: Meta COO Javier Olivan, the next to hold that title after Sheryl Sandberg.

Meta witnesses keep invoking “paranoia” to explain away emails where senior executives express their fear at the competitive threat from Instagram and WhatsApp. But it’s not the defense Meta thinks it is. Don’t believe what I wrote because I’m paranoid and delusional is an odd line of defense coming from smart people who seem to be following their incentives for action. And it’s a distinction without a difference in its anticompetitive motive. Grove himself goes on to explain in the third paragraph of his book: “And, of course, I worry about competitors.” Most dangerous is a “strategic inflection point,” when the fundamentals of a business are challenged with obsolescence or creative destruction by a disruptive product. Those points “can be caused by technological change” and “can be caused by competitors” but are a unique combination of the two. And a “strategic inflection point can be deadly when unattended to,” Grove warns. The successful businesses jealously guard their kingdom, and the ones that don’t, die.

That’s exactly the kind of concern Olivan pushed. Paranoid or not, he was worried that WhatsApp could become an unstoppable social network—“this shit is getting scary,” as he characterized the threat chat apps posed to Facebook.

Fire up Flagpole Sitta (the song quoted up top) and read on to enter the Valley of the Paranoid.

Who’s Afraid of WhatsApp?

Meta COO Javier Olivan. Credit: Cmichel67, CC BY-SA 4.0, via Wikimedia Commons

Olivan joined Meta as head of international growth, became head of overall growth and served in that latter role for most of the relevant period. Eventually, he took over as COO after Sandberg stepped down, though Olivan added that his role had little overlap with Sandberg’s responsibilities because he came up on the product side of things.

The FTC’s direct examination with Olivan covered WhatsApp and Instagram in turn. But first, FTC lawyer Noel Miller tried to get Olivan to agree that the core purpose of Meta’s apps is connecting with friends and family, the use-case supporting the FTC’s personal social networking services (“PSN”) market. Like other Meta executives, Olivan explained that friends and family sharing makes up less of users’ time today, with Reels dominating users’ time spent on Meta’s apps. He even floated that there are Facebook users who join without any connections. Has anyone told him about Russian bots?

Then it was on to WhatsApp, which has been covered in detail throughout trial. We saw some exhibits we’d seen before, and some new ones, too. The FTC began with a juicy email from Olivan circa June 2012 discussing the growth of Kakao Story, a social network built from Kakao Talk, the South Korean messaging app. Kakao and other Asian apps followed a blueprint that the FTC wants to show applied just as much to WhatsApp: starting with a big user base on a messaging app and introducing new features to that app to build it into a social network. Olivan wrote (with my emphasis):

“Can you guys complete a ‘this shit is getting scary deck’ given all the data we have now?”

Olivan’s “paranoid” email prompted preparation of a deck that summer. The revised version of the presentation added a specific qualifier about WhatsApp: “Except WhatsApp, [mobile messaging apps] are following the strategy: Growth —> Service Expansion —> Monetization.” Olivan testified that Meta “had no evidence that WhatsApp was morphing into a social network.”

Along similar lines, the FTC asked about Olivan’s efforts to stop Apple from importing a user’s Facebook contacts into their address books. This led to another fearful email from Olivan (emphasis added):

“I sent you a bunch of info on the messenger services/their growth/how they are morphing into ssns [social networks]/growing all over the place already: WhatsApp [is a] top 3 app in 100 out of 114 countries of Apple store. FWIW: I am as worried for the future of the company as you are and I really don’t like the idea of going nuclear either . . .”

Olivan explained that this exchange wasn’t about stopping Facebook users from importing Apple contacts, but the reverse. “By writing our graph into the address books in Apple, we’d be making everyone’s life a lot easier. I just don’t like to help competitors,” he testified. Facebook ultimately let Apple devices import contacts.

In another message, Olivan echoed Andy Grove’s paranoia to a tee:

“I believe (otherwise i would not have made such a big deal of this) that the sumproduct of shift to mobile + messengers growing organically with huge retention and virality = potential recipe for [Facebook to] not be around in a couple . . . years from now.”

And the hits kept coming. In another communication, an email chain we’ve seen before where Facebook executives including Zuckerberg, Sandberg, and Olivan decide to cut off the threatening chat apps from advertising on Facebook, Olivan stated his fears bluntly in two exchanges (emphases added):

It sounds great to say that we should let them do it because we are better, we will look weak, etc . . . but we will look like complete idiots if we lose our business to these messenger services and help them along the way for a couple of $s! The sum-product of shift to mobile + messenger services morphing into fully fleshed SSN sites is IMO the biggest competitive threat we face as a business. I can see the point about where to draw the line / ever growing list of competitors, but IMO messenger services deserve special treatment, since it arguably is one of the most dangerous beach heads to morph into FB.

Sound familiar? It reads like one of Andy Grove’s “strategic inflection points.”

Olivan claimed that WhatsApp didn’t pose the same threat, even though he posted this tweet from WhatsApp immediately below the passage in the email above:

Undeterred, Olivan testified that “WhatsApp was showing absolutely no signs of morphing into anything else. It was an extremely thin app” that did the same thing that SMS—the standard text protocol between cell phones—did. Olivan saw WhatsApp’s unique selling proposition as solving a problem of the early 2010s where wireless networks were charging customers perhaps $.25 per text message. WhatsApp charged only $1/year for unlimited messaging, available with a WiFi network or a wireless data plan. This mattered less in the United States, said Olivan, because the networks there had moved more quickly to wireless plans with unlimited data and a large number of text messages.

Olivan rattled off a bunch of features WhatsApp was missing like “profiles with rich information,” an equivalent to Facebook Marketplace, a status (which it has since added), broadcast to a feed (but there was some limited broadcast functionality, he admitted), or a way to add friends beyond a smartphone’s address book.

Of course, all this testimony missed the point: WhatsApp could have, and in fact did, add some of these social networking features just like Kakao and other Asia-based messaging apps. And it was incredible to deny the connection Olivan himself had implicitly drawn in his own email.

Chief Judge Boasberg focused on the explanation that WhatsApp was, in the court’s words, “less appealing” in the United States, where wireless plans offered a chunk of free texts. “Is there any advantage today of using one form over the other?” Boasberg asked. Olivan explained that there aren’t big differences between messaging apps anymore, at least not for the core messaging use-case of one person to one person messaging. Sensing that the judge’s questions favored the defense’s position, Miller did a mini re-direct in response, leading Olivan to admit that Apple’s iMessage isn’t available outside of Apple devices.

Olivan sent the below email further in the same chain, adding an unwarranted “attorney-client privileged” stamp in shorthand at the top, perhaps hoping it would be shielded from discovery in the future with some fake privilege:

A/C priv

I would block products that, if successful, could replace our core functionality & engagement/ jeopardize our complete existence. . . . I would be worried about SSNs like G+ / Path (if they were successful) and I am definitively worried about mobile messengers with scale (which as opposed to G+/Path have huge retention, are already extremely successful and evolving into full SSNs where you can share all types of content, have identity and profiles, are becoming gaming platforms, and are literally one step away from having a full newsfeed).

Today on the witness stand, Olivan said he was simply being "a bit hyperbolic" in this email because nothing indicated “that we would lose all the business.” It was unconvincing.

There were still more emails along these lines from 2013, including another “scary” email exchange we saw last week in which Amin Zoufonoun, Meta’s VP of Corporate Development, emailed Olivan:

“The scary part, of course, is that this kind of mobile messaging is a wedge into broader social activity/sharing on mobile we have historically led in web.”

Olivan explained other emails from this 2013 period as focusing on Facebook Messenger and his desire to improve that product. Sure, he admitted, he was “absolutely” a proponent of the WhatsApp deal, but he thought the use cases for Messenger and WhatsApp were slightly different, even if Messenger had to improve.

On cross, Meta’s lawyer Kevin Huff showed an email from Olivan to Zuckerberg reiterating the point:

“I would continue investing in Facebook Messenger since there are meaningful complementary differences (and more to come) between a service like Whatsapp (pure SMS replacement) and where our messaging products are heading. That said, owning a service like Whatsapp would allow us to do the following things. . . “

Zuckerberg replied that he agreed. “If we work together, we can meaningfully accelerate WhatsApp’s adoption and help deliver free basic internet services to everyone in the world. It’s incredibly exciting,” he said. One FTC exhibit showed a drop-off in Facebook Messenger usage in favor of WhatsApp, though, a data point we’ll probably see discussed later by expert witnesses.

Olivan Twist

Some other highlights:

• The WhatsApp module finished off with an email chain we saw yesterday between Ben Davenport and Olivan, where Olivan seems to agree with Davenport’s prediction that Google acquiring WhatsApp would present risks. Olivan gave a long explanation about how this was really just hypothetical and would require a “huge chain of ifs that need to align for this to be a possibility,” like Google actually acquiring WhatsApp, actually combining with Google+, actually getting WhatsApp’s famously focused founders to agree to that, and so on. But he added that this wouldn’t be an issue in the United States anyway since WhatsApp didn’t have many U.S. users before being bought by Facebook.

• The rest of the FTC’s modules with Olivan didn’t work out as well. Turning to a topic we’d already heard about, Instagram’s cannibalization of users’ time from Facebook, we learned that after Zuckerberg pulled the plug on all the ways Facebook was helping Instagram in 2018, prompting Systrom’s departure, there was only a “3% delta” in something called MAP, though I didn’t catch how that metric was defined. Whatever that is, it doesn’t sound that bad. Miller also tried to get Olivan to endorse the consumer sentiment metrics we saw about Cambridge Analytica, but he testified that he didn’t know anything about them.

And the highlights from Meta’s cross-exam of Olivan:

• Olivan was shown his email summarizing a meeting with Zuckerberg after the Instagram deal was announced, where he wrote that “Instagram is growing at a crazy rate after the announcement, so the guys are barely being able [sic] to keep the site up & running.”

• Huff walked Olivan through the many ways Facebook helped Instagram, like optimizing the registration flow, notifications frameworks, and “[l]iterally thousands of things we learned over the years that really influenced the growth.” Facebook also pioneered sorting a feed by the user’s interest, rather than merely in reverse chronological order, the latter of which Systrom wanted to keep on Instagram. This all aids Meta’s argument that Instagram needed its help.

• Meta also flashed a demonstrative comparing Instagram’s growth and Facebook’s growth, measured by monthly active users in the United States, from 2012 through present. The FTC objected to the use of 2025 data and pointed out on re-direct that the chart appeared to give the 2012 figure from before the deal’s announcement, rather than at the time the transaction closed. Meta is using this to show that Instagram needed Facebook to grow its user base, but as we’ve pointed out, WhatsApp also launched on Android after the Facebook acquisition was announced, which could have caused that spike.

• Olivan also said Meta spends $60 billion in infrastructure—which got Chief Judge Boasberg’s attention, who asked if that was an annual figure (it was). As a percentage of revenues, Meta’s capital expenditures like this have increased over time to the “high 20s,” Olivan said.

The Apple Doesn’t Fall Far

Olivan took up most of the day, until 3:13 PM ET, in fact. So there wasn’t a lot of time left for the second and final witness of the day, Ronak Shah of Apple, who testified live over Zoom. The FTC’s Miller stayed on her feet to examine Shah, too.

Shah is the director of product management at Apple, where he oversees things like the Safari browser, Facetime, and iMessage.

The examination got right to the point: Does Apple have a personal social networking service like Facebook or Instagram? No, Shah answered. “Our focus has been on building apps that let you communicate with people you know, either individually or [as] a small group.” While Zuckerberg used antitrust offense against Apple as defense against the FTC, here, the FTC used Apple’s potential anticompetitive conduct as offense to show that iMessage is outside the relevant PSN market in this case: Shah explained that Apple offered iMessage “to elevate the experience that people enjoy when they buy our hardware products,” something that the Department of Justice is separately alleging is anticompetitive.

The FTC’s direct established a litany of ways that Apple iMessage differs from Meta’s apps:

• You can only add contacts by getting someone’s phone number or Apple ID

• There are no suggested people you should know

• iMessage group chats are limited to 32 people

• Users can’t see each other’s contacts, for privacy reasons

• iMessage doesn’t have an algorithm that sorts threads or messages

• There are no ads in iMessage

• iMessage isn’t available on non-Apple devices, and the messaging protocol doesn’t fully work with texts from non-Apple devices

On cross, Meta’s Daniel Dorris showed that iMessage is actually listed in Apple’s app store in the “social networking” category. iMessage probably isn’t found there all that often, because as Chief Judge Boasberg pointed out, iMessage comes preinstalled on iPhones. That category, curated by editors, includes a who’s who of apps Meta says are all competitors: TikTok, Snapchat, Instagram, Facebook, X, Discord, Facebook Messenger, WhatsApp, Pinterest, Tumblr, Reddit, and LinkedIn.

Much of the rest of cross (and some direct) took place in a sealed court session. But you can probably by now guess the themes that the parties were seeking to establish.

We’ll be back for Days 11 and 12, which will end about an hour early for the court’s other hearings.

Other Thoughts

• In light of the report around sexually explicit content from Meta’s AI feature, and Zuckerberg’s testimony in this trial about AI glasses and holograms, it’s worth watching Zuck’s interview on the Theo Von podcast, which dropped Monday. Starting around the 1:04:16 mark, Zuckerberg gives basically the same speech he gave on his last day of testimony. We don’t know which came first, the filming of this podcast or his testimony, but it’s pretty incredible how much of the trial to break up his company was devoted to a sales pitch he repeated in sum and substance on a comedy podcast. And today, Meta announced the launch of a standalone AI app. The distant future is here already.

• In Week 1, I shouted out the debaters involved in the trial. And I introduced the concept of the “burrito question,” something I learned about on Georgetown Law’s mock trial team. So today, shout out to the mock trial-ers: specifically, to the FTC’s Noel Miller. At Georgetown, Miller ran the mock trial program as a 3L (third-year law student) during my first year of law school. After graduating, she would return to coach some of my classmates, including at the much-coveted Puerto Rico tournament. Day 10 was the Noel Miller show. She has had some big-time witnesses in this trial, handling the direct of FTC expert Kevin Hearle on Day 8. On Day 10, she examined both Olivan and Shah. She did a nice job with witness control on Olivan, who at one point lamented, “She’s being so quick, I’m trying to match her,” when the court reporter asked him to slow down. On the break, she was chatting with the court reporter, presumably about the requests to slow down: “I just get so excited,” Miller said. She also joked at one point that she’s a non-iPhone user. Same! The FTC’s lead lawyer, Dan Matheson, has been positively beaming with pride when she speaks. If you’re a law student considering the highfalutin world of moot court, take a look at mock trial for the portable skills. Having done both, I can tell you that mock trial is both more fun and more useful. And who knows, you might just meet your spouse doing it, like Miller did.