In a world where Facebook is valued at $611.65 billion, Instagram at over $100 billion, and Twitter worth $30.32 billion, one has to wonder where social media sites like Google+, Tumblr and Vine went wrong. With social network penetration recorded at 45% at the start of 2019, there certainly isn’t a lack of demand or consumers to sell to. Yet, why do many of these companies continue to fail?
Facebook will make them an offer they can’t refuse
Today, Facebook remains the undisputed king of social media, whose revenue alone is worth the value of a handful of big social media companies combined. Facebook is often seen as having captured lightning in a bottle, outperforming its predecessor MySpace and eventually signing their death warrant, then going on to reign supreme for the next 14 years after it went global.
Meanwhile, no one has been able to beat Zuckerberg’s brainchild since. This has partly been due to Facebook having a very aggressive strategy for dealing with competitors, buying out those it can, and duplicating the features of those who refuse its offer ad nauseam. It’s not the most honorable of business practices, but it’s been working for them. Snapchat, seen in the past few years as the new kid on the block threatening to steal away all of their young users with short, perishable content, was a threat, and one they couldn’t buy out. Facebook, their feathers ruffled following the rejection, copied their features, such as Stories, and integrated them into everyone of their apps – Facebook, Messenger, Instagram and Whatsapp – in an overkill effort to water down Snapchat’s unique identity and kill off its novelty factor.
Snap had refused a $3 billion offer from Facebook, and today, is worth around $24 bilion.
“In the summer of 2016, [Zuckerberg] told company employees at an all-hands meeting that they shouldn’t let their pride get in the way of doing what is best for users—even if that meant copying rival companies,” Wired reported. “Zuckerberg’s message became an informal slogan at Facebook: ‘Don’t be too proud to copy.’ And it certainly wasn’t.”
Today, that is the nature of the business of social media. Facebook is head honcho, and almost everybody has to play by their rules, which is ironic given its humble origins as a innovative startup with struggles against the big man.
“There was a time when it looked like a startup building another Facebook Inc. wasn’t just possible, it was likely,” Bloomberg’s Kurt Wagner writes. “I no longer feel that way, and I’m torn on why that is.”
“On one hand, it’s hard to imagine any startup has a unique enough product and deep enough pockets to survive in Facebook’s worlds of social media and messaging. Facebook is a notorious buyer or copier of anything interesting that comes along, and while the company would argue it doesn’t have a literal monopoly on communication products, it’s hard to imagine an upstart thriving on the company’s turf.”
It was this quote above that truly piqued my interest and pushed me to write this ponderous piece. Are these companies truly living on Facebook’s “turf,” bowing to its every whim and fancy as if this was 1930s New York?
One has to wonder. It does seem like it’s growingly becoming ‘my way or the highway’ with the social media giant. Not even heavyweight rivals like Google are able to keep up, with the search engine giant delivering the royal failure that was Google+.
When we look at those who did succumb to the company’s buyout offers, we see that they became some of the biggest names in the social media game today; names like Instagram and WhatsApp. Other companies that were acquired, such as the now-defunct FriendFeed, had their features assimilated into the all-encompassing Facebook News Feed. It seems that you either grow as part of the Facebook network, or you become fodder for its growth. That’s capitalism for you, I suppose.
When we look at Vine, another rising star that eventually died out as fast as it rose after being bought out by a larger competitor (Twitter), we see a similar situation. For one, Vine wasn’t able to innovate enough to keep up with other video platforms, while at the same time, Twitter had a lot of problems of its own to be bothered with solving Vine’s.
One of the reasons why Vine lost users as quickly as it gained them? The rise of short-video content amidst competitors. Who were those competitors? Primarily, it was Facebook-owned Instagram, which introduced videos on its app in 2013, around the time when Vine’s popularity was peaking. Snapchat also had a major role in their demise, as it was very similar to Vine’s format, except there was no 6-second limit. By 2016, Vine had lost nearly half of its top 1% users, those with the most followers. Fast-forward to 2020, with Vine long gone, we still have Facebook and its subsidiaries still locked into fierce competition with Snapchat, the two killers of Vine. It’s truly quite the food chain.
So what is Facebook doing today to overpower the opposition and gain wider market presence? Why, diversification, of course. It bought VR innovator Oculus in recent years, and in 2019 announced that it was working on its own cryptocurrency.
Facebook’s Goliath meets its David
In reality, Mark Zuckerberg’s greatest fear has always been the competition, with TikTok being the latest nemesis on the block. The Chinese social media platform is often seen as Generation Z’s Vine, garnering great traction in the past two years. Perhaps not surprisingly, TikTok is owned by ByteDance, a Chinese tech company that runs several popular social networking apps, in the vein of Facebook’s ownership of WhatsApp and Instagram.
“Think of ByteDance — headquartered in Beijing, China — as China’s Facebook. Both companies own families of popular social networking apps used by billions of people a day,” Business Insider (BI) states. Oh, and ByteDance? It’s the world’s most valuable private company today. worth $75 billion.
The existence of TikTok is a relatively new concept for Facebook, whose greatest rivals in the past 14 years have primarily been fellow US companies. The fact that this is a Chinese company encroaching on their territory opens a new door of opportunities for other Chinese social media platforms like WeChat and Weibo to find footing in the West.
“TikTok, which is built by this company Beijing ByteDance, is really the first consumer internet product built by one of the Chinese tech giants that is doing quite well around the world,” said Zuckerberg in a leaked audio recording of an employee meeting released by The Verge, and cited by Business Insider. He specifically said it was doing well with “young folks” in the US and India. “I think it’s past Instagram now in India in terms of scale,” he said.
Zuckerberg then said that one of Facebook’s plans of attack was to launch its TikTok competitor Lasso in markets where TikTok hadn’t yet got a foothold, like Mexico, BI continued.
“We’re trying to first see if we can get it to work in countries where TikTok is not already big before we go and compete with TikTok in countries where they are big,” said Zuckerberg.
The TikTok reckoning has been brewing for a while, with the Chinese platform being the fourth most downloaded non-game app for all of 2018, according to SensorTower. In 2019, TikTok was the world’s second-most downloaded app in 2019, behind only Whatsapp, and now generates $40m per month.
Sorry, Facebook, but it doesn’t look like this is a company you’ll be able to put out of business this time. It seems your Goliath has finally found a worthy David.