Facebook (FB) co-founder Chris Hughes has made some waves by writing a lengthy New York Times op-ed column in which he calls (among other things) for Facebook, Instagram and WhatsApp to be broken up into three companies. He cites Facebook's impact on social media competition and innovation as a reason for breaking it up, as well as its impact in areas such as consumer privacy and online speech.
Others have also argued over the years that Facebook should be broken up -- Columbia law professor Tim Wu is one notable example -- while others such as tech analyst Ben Thompson have argued the Instagram and/or WhatsApp acquisitions should have never been approved by regulators. It's seems pretty unlikely that the Trump Administration will push for a Facebook breakup, but given how political and regulatory sentiment towards tech giants has changed lately, it's not inconceivable that some prominent Beltway figures bring up the idea in the coming months or years.
But looking at this issue simply through the question of what a Facebook breakup would entail at this point, and what its impact would be on consumers and advertisers, a Facebook/Instagram breakup seems pretty unlikely at this point. And though a Facebook/WhatsApp breakup would be easier to pull off for now, the messaging, payments and advertising projects Facebook has underway stand to make it a lot more challenging in a couple years' time.
Thanks to a series of moves made over the last few years, Facebook and Instagram are joined at the hip. Instagram has long had access to Facebook's social graph, which it uses to do things such as make friend suggestions and add profile photos. In addition, users of Instagram Stories are able to cross-post content to Facebook Stories, Facebook's augmented reality effects platform for photos and videos has been extended to Instagram and advertisers are able to run a targeted ad campaign across Facebook and Instagram (and for that matter, Facebook's mobile ad network). Undoing all of these integrations wouldn't go over well with many consumers and advertisers.
Integrations between Facebook and WhatsApp are more limited for now; WhatsApp relies heavily on contact book listings to connect users, there's no integration between Facebook and WhatsApp's stories services for now, and for the moment WhatsApp doesn't show any ads. But Facebook does plan to start running ads against WhatsApp's stories service (known as Status) later this year, and it's quite likely the company will let Instagram and Facebook Stories advertisers run cross-platform campaigns.
More importantly, Zuckerberg is two months removed from unveiling plans to let users of Facebook Messenger, Instagram and WhatsApp's messaging services communicate with each other, and supporting end-to-end encryption across all three platforms. And there have been a slew of reports indicating that Facebook is working on a stablecoin -- a cryptocurrency pegged to the value of one or more existing currencies -- meant to facilitate low-fee payments on its platforms (WhatsApp included) and elsewhere.
As it is, implementing any kind of Facebook breakup would be quite messy at this point. And pulling it of will be a lot messier still by 2021.
Eric Jhonsa will be hosting a live blog on Friday at 11:30 a.m. ET to answer reader questions about Uber's IPO and other tech stocks. Please check the Real Money home page at that time to join us.