Expansion of the Social Network: Facebook & Kustomer

    Facebook Inc. announced on 30th November 2020 that it is planning to acquire a New York-based customer relationship management (CRM) start-up, Kustomer Inc., founded by Brad Birnbaum and Jeremy Suriel. The five-year-old CRM platform has signed an agreement to be acquired by Facebook subject to customary regulatory review. Kustomer is a start-up that started with the aspiration of reimagining customer service by automating repetitive tasks so agents can make efficient use of their time and amplify the quality of interactions with customers. It helps brands flourish and thrive in the Internet Economy with modern customer service. 

    In a blog post drafted by the CEO of Kustomer, Brad Birnbaum, he mentions how once the acquisition closes, the Kustomer team will join the Facebook family. The terms of the deal are private and the amount of the deal has not been disclosed yet. However, according to two people familiar with the acquisition talks, the deal is valued at around a billion dollars.  

    This deal could grant businesses and customers more support and strengthen the interactions that take place over Facebook and its other messaging apps, like WhatsApp, Instagram, and Facebook Messenger. Even though Facebook is being monitored under the hawk eyes of the Federal Trade Commission (FTC) and Department of Justice (DOJ) for antitrust scrutiny, that has not interrupted the social network from buying promising start-ups and neutralizing them as a threat and eliminating the competition. The FTC and state attorneys are preparing antitrust lawsuits against the media giant for controlling and maintaining its power through past mergers of blossoming competitors such as the $1 billion purchase of Instagram in 2012 and the $19 billion acquisition of WhatsApp in 2014. Antitrust law is the law of competition, statutes developed by the U.S. government to protect consumers from unlawful business practices and safeguard their interests by ensuring impartial, lawful, and fair competition exists in an open-market economy. If a competitive market is absent in an economy, a monopoly is created.  

    However, Facebook has completely denied the claims of abusing its power in the digital economy saying that they operate in very competitive markets and their services, which are mostly free, prove to be nothing but advantageous to consumers. The CEO, Mark Zuckerburg has even cooperated with the senators probing the matter and testified for the same.

    Facebook has said that Kustomer’s software could aid in assisting numerous business conversations all over the world. Facebook’s most popular messaging app, WhatsApp, has more than one billion users globally and has recently dipped a toe in business messaging services. Since the advent of the coronavirus pandemic, people have resorted to home quarantine and abiding by lockdown regulations universally, buying products online and maintaining business relationships virtually rather than in person. This has also caused an upsurge in the demand for CRM software. “It was going to happen naturally. It’s just been accelerated by Covid,” said Brad Birnbaum. 

    We are yet to see how this deal will help businesses interact with their customers more efficiently and effectively if it gets approved by the regulators. Is Facebook really playing by the rules by neutralizing nascent yet threatening competitors? What do you think? 

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