Why copying Snapchat makes more sense for Facebook than an aquisition
Facebook famously tried to aquire Snapchat back in 2013 for approx. $3bn. Snapchat declined the offer and over the last year Facebook has rolled out a good chunk of new features across its own platform landscape – Facebook, Instagram, Messenger, WhatsApp.
But with a lot of rollouts came headlines like „Facebook copies Snapchat […]“, „Instagram vs. Snapchat“, … and Facebook was accused of continuously copying Snapchat. Even down to the very name of features like „Stories“ on Instagram.
One very obvious fact why Facebook wants to copy Snapchat so badly is the huge reach among 18–24 year olds — which was almost 5x Facebook’s user base in 2015.
But there’s gotta be more to that, right? Facebook is the largest network we’ve ever seen already — far ahead of any other platform, network, app etc.
By taking a closer look at Facebook’s strategy, feature releases and more you get a clear understanding why there’s more to this than just trying to appeal to young customers.
Copying over innovating…because of scale
If you are familiar with the concept of network effects then you should also be familiar with the concept of scale — always in a digital context.
Simply put, a network effect occurs when a product or service becomes more valuable to its users as more people use it.
Other examples would be Uber or AirBnb, which have also been growing massively over the last years — thanks to network effects. But how does this affect Facebook and its strategy?
Take a feature and make it “better”
It means that in the digital age you don’t have to be first with anything anymore, you better try to be the best — on of the most famous examples would be Apple. Especially not if you happen to be the biggest digital platform on the planet. One example is the UI of Instagram and its “Stories” feature, which you can read more about here. Basically Instagram made it easier and “more intuitive” for users (actually for their core demographic, 25–34 years) to actually use the feature. Another example would be Facebook’s “profile frames”, which are a copy of Snapchat’s “Geo Filters”, one of its most popular products — for private users (usage) and businesses alike (exposure).
Scale leads to decline leads to pressure
We already know that Facebook has been growing massively over the last eight years. Growth on the platform is based on three main factors:
- User growth
- Time spent on the platform
This strategy has been a very successful one over the last years continuously increasing the platform’s revenue. However, as Facebook’s CFO David Wehner stated the growth in ad revenue could “come down meaningfully” after mid-2017 and revenue growth could start to decline — which is just a logic economic behaviour: secular stagnation.
Investments in new ad products will continue to enable more advertiser appetite.
This sentence sums up the a problem Facebook is facing, which is monetizing its community. The platform has been working on various monetizing strategies (here or here) and is furthermore “[…] developing a number of new ad products as well as enhancing the ad products that we have out in the market today […]”, according to CFO Wehner. Facebook admits that it is struggling to keep monetizing its community and is therefore looking for new ways to do so.
An acquisition might even make sense in this context — you acquire a team, technology, acceptance within a demographic, … but you have to spend a lot of money ($3bn in 2013, $18bn in 2016).
Scale leads to advantage
However, Facebook is not on the brink of extinction and it might sound worse than it is in reality. This very statement from the company’s CFO is one of the main reasons Facebook is continuously copying successful features from its competitor — a smart strategy I have to admit.
If it is not clear by now: The size of Facebook and its other platforms is one of the key factors and advantages to consider here. The social network keeps copying features (stories, filters, disappearing content, …) which have proven successful on Snapchat. Facebook can now build on this knowledge and implement these features in its own platforms, offering brands and advertisers new and exciting ways to engage with fans and communities (showing some form of success).
The success factors Facebook has are:
- Community size of approaching 2 billion MAUs globally (vs. 300m MAUs on Snapchat) → Facebook can therefore scale its ad products much faster
- More data & targeting possibilities are one of the key assets of the network and very appealing to brands and advertisers (vs. Snapchat, which is just starting to work on its advertising ecosystem)
- An already familiar ecosystem for most brands and advertisers active in the digital world (vs. adapting to a new, smaller and for many not intuitive platform)
- Shared revenue with its advertisers and continuous ways of sharing revenue with ads like mid-roll ads or shared revenue with production companies producing for Facebook
Looking at all these factors it makes sense why Facebook is trying to copy, test and implement a wide variety of features, formats etc.
To give an example: If a format like “profile frames” (= the copy of Snapchat’s geo filters) turns out to be popular among users (personal use) and brands & advertisers (branded use, brand engagement increase) the platform has much greater capabilities (and experience) in 1) rolling out such a product globally and quickly thanks to its size & scaling and 2) monetizing it with trusted partners, agencies, brands, …
Both players are here to stay
But is scale the only factor to consider here? No, not really.
In the end it basically comes down to the users themselves and which platform they prefer, for whatever reason. They might be familiar with one platform already, don’t feel comfortable using a copy cat, have different needs.
I’ve already talked about this, but one of the main differentiating factors between the both to me still is the strategic alignment:
- Snapchat: a camera company, mobile-only, moments (& AR?)
- Facebook: connect the world, (well) mobile-adapted, memories (& VR?)
You can see a clear distinction between the two as well as Facebook’s other products Instagram (high quality content) and Messenger (communication). Just adding new features to products does not mean that another product is going down, especially not if they are as different as described.
It will, however, be interesting to see how each of the platforms will evolve in the next 12 months and how they affect each other.
Anything to add? Feel free to leave a comment or get in touch via Twitter @mlvb_at