Audit Notes: Instaflim-flam, off the Hamster Wheel, Hulu

The New York Times raises questions about a CEO's sworn testimony

The New York Times’s Nick Bilton reports that Instagram CEO Kevin Systrom appears to have misled regulators asking about Facebook’s acquisition of his company—while under oath.

Bilton quotes anonymous Facebook and Twitter sources saying that Instagram and Twitter had a verbal agreement for a $525 million deal last March, before Facebook approached. But Systrom told regulators, “we never received any offers.”

At the end of the hearing, regulators asked Mr. Systrom a third time about other offers: if there had been “any other inquiries from third parties about a possible acquisition of Instagram” after the Facebook deal was announced. Although Twitter executives had since tried to contact Mr. Systrom, he replied, “I and the board have not received any.”

This is a sweet scoop, but the story is poorly assembled. Felix runs down several irritating examples. Here’s another I noticed:

It is unclear why Facebook didn’t mention Twitter’s interest. A clue might be found in the company’s amended S-1 filing with the Securities and Exchange Commission, outlining details of the Instagram acquisition: Dr. Talley said it used language often reserved for antitrust cases.

The wording in the updated S-1 filing, which included a termination fee of 20 percent if the deal fell through, “suggests that there really was some concern about antitrust clearance from the F.T.C.,” Dr. Talley said, referring to the Federal Trade Commission. “These antitrust questions would not have been raised if Instagram was selling to Twitter or Google.”

Well, what’s the language and the wording? And why not get at the antitrust point—presumably a motive for Systrom to dissemble—more directly and higher up?

— David Carr has a much easier to read column on The Wirecutter, a gadget-picks website started by former Gizmodo editor Brian Lam, who wanted to get off the Hamster Wheel:

If anything, digital technology has overwhelmed those who sought to master it. The Web may be a technological marvel, but to most people who use it for work, it functions like an old-fashioned hamster wheel, except at Internet speed.

Brian Lam was both a prince and a casualty of that realm. After interning at Wired, he became the editor of Gizmodo, Gawker Media’s gadget blog. A trained Thai boxer, he focused his aggression on cranking out enough copy to increase the site’s traffic, to a peak of 180 million page views from 13 million in the six years he was there…

And then, he burned out at age 34. He loved the ocean, but his frantic digital existence meant his surfboard was gathering cobwebs. “I came to hate the Web, hated chasing the next post or rewriting other people’s posts just for the traffic,” he told me. “People shouldn’t live like robots.”

Amen to that. Carr reports that The Wirecutter already brings in $50,000 a month in revenue and is doubling it ever three months. Very little of its revenue comes from advertising. It gets a cut when people click through its recommendations and purchase them on Amazon.

— On the paid content beat, Hulu doubled its subscribers (who pay about $7.99 a month) this year, jumping to more than 3 million from about 1.4 million a year ago.

Meantime its total revenue was up 65 percent from a year ago, which means that subscriptions are probably growing quite a bit faster than advertising, which makes sense because the paywall is newer.

It looks like by the second quarter or so of 2013, Hulu will get more money directly from subscribers than it will from advertisers.

GigaOm covers this news with a headline that says by saying “Hulu made $695M in 2012”. But it didn’t. In business, “made” means “earned,” as in net income. Hulu’s $695 million is revenue. It very likely won’t make any money this year.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,