Facebook has no desire to compete with Snap on product
Ever since Facebook launched stories on Instagram in 2016, people have been talking about Facebook’s desire to become a Snapchat clone and solve some existential crisis about lack of product innovation. To say that Facebook is copying Snap’s product isn’t wrong — they’re certainly doing this — but saying that Facebook wants to compete with Snap on product is a misreading of Facebook’s strategy. Why would Facebook, a company that has historically lagged on feature development, wish to compete with a company that just successfully IPOed by convincing investors it was the most innovative product development company in social? That sounds dumb because it is dumb. Instead of competing with Snap on product, Facebook’s strategy is to leverage its own advantage (network effects & scale), while simultaneously making product differentiation irrelevant through commoditization.
To make sense of Facebook’s strategy, it is essential to understand what makes a market “winner takes all.” In their paper on network effects, Andrei Hagiu and David Yoffie noted that for a WTA market to exist, “the value of the network effects must outweigh the benefits of differentiation for users,” which is to say that if Snap provides a compelling enough product experience versus other social networks, it will be enough to draw users away from the incredible stickiness of an established social network like Facebook. Facebook doesn’t have to build a better version of Snapchat, it just has to make its version close enough to the original that the value of Snap’s innovation, the thing they sold themselves on, no longer outweighs the benefit you enjoy on Facebook from having all your friends in the same place. So how is Facebook accomplishing this?
One under-discussed feature of Instagram’s stories is the ability to upload directly from your phone’s photo album. Facebook knows that many people will prefer the lenses and geo-filters of Snapchat (i.e. Snap’s product differentiation), so Facebook allows you to take anything you create on Snapchat and port it directly to Instagram. Though there isn’t good data on how many Instagram users utilize this functionality, endless amounts of how-to-guides on Google suggest it’s not insignificant.
The second (and really main) thing that Facebook has focused on is the commoditization of Stories. If your prefered method of communication is Stories (i.e. it’s a differentiatable feature to you), Facebook has made sure you can use it natively in any of its apps. Facebook wants to make Stories ubiquitous enough that they no longer seem special enough to abandon the established network you’ve already built on Facebook’s platforms. How effective has Facebook been at commoditizing stories? Well, there is now an entire meme dedicated to the commoditization of stories. We have iOS Settings Stories, Music Stories, Alarm Stories, Story Stories, and my personal favorite, Excel 2018 Stories. The joke is literally that stories can and will be slapped on to anything…so yeah, Facebook has been pretty effective at commoditizing stories.
Facebook is masterfully executing on its tried and true (see: live video) strategy, but does that mean Snap is dead? Not at all. Snap’s story is actually quite similar to Instagram’s before the Facebook acquisition. Like Instagram, Snap differentiated on features (coincidentally also filters and non-Facebook sharing) to pull new users away from established social networks. Like Instgram, Snap also achieved enough scale through product differentiation to create a pretty sticky network of its own. By itself, that accomplishment should be enough to sustain Snap for the foreseeable future. However, the real irony of Snap is that it’s best defense against Facebook has nothing to do with the feature innovation it sold itself to investors on and instead has everything to do with the non-innovative features it doesn’t have. Unlike Facebook, Snapchat has a greater sense of privacy and ease of sharing. It’s a closed network where users can share freely without (too much) concern about leaving a mark forever. Your Snapchat network doesn’t include everyone you’ve ever met. For all the hoopla around future innovation, it is Snapchat’s original innovation — detachment from the foreverness and the uncoolness of Facebook — that gives Snap it’s best shot at continued success.
