FB To Snap: We Have More Money, No Shame About Copying, And We Will Bury You
Back on February 28, the day before Snap Inc’s IPO, Rob Moore published a piece in NewCo explaining why he believes “Snapchat won’t make it to the end of the year.”
He makes some solid arguments, which, in brief, are:
- Snapchat has no user history (it is, after all, built on ephemerality)
- Snapchat has depleted its users’ goodwill through technical shortcomings and “thoughtless” monetization before adding new user features
- And, most importantly, Facebook is out for blood.
This last point is highlighted by the launch of Messenger Day by Facebook today, the social networking giant’s answer to Snapchat stories. But Messenger Day is just Facebook’s latest move to close in on Snapchat.
My friend Alex Wilhelm tweeted the following after the product announcement today.
Facebook’s campaign of ruthlessly copying Snapchat’s features signals what could only be a mix of slight concern and, let’s face it, a fair amount of f***-you bravado.
It’s now to the point where the company risks cannibalizing its own platforms to wage this campaign. Recall that Instagram, owned by Facebook since 2012, launched its own Stories feature in 2016. The New York Times described the new feature as follows:
On Tuesday, Instagram introduced Instagram Stories, which lets people share photos and videos that have a life span of no more than 24 hours with friends who follow them. The service bears a striking resemblance — some might say it is a carbon copy — to Snapchat Stories, a photo- and video-sharing format where the stories also disappear after no more than 24 hours.
(See Note at end of the article regarding the provenance of the quote.)
So now Facebook owns two major platforms with features that ostensibly emulate Snapchat Stories: Instagram Stories and Messenger Day. Why? Because Snapchat is the only social network to emerge that has anything greater than a snowball’s chance in hades of competing with Facebook for its users’ attention. In the eyes of Facebook, it’s better to converge on an opponent on two fronts and risk minor declines in use of its flagship ephemeral sharing product (Instagram Stories) than compete one-on-one.
But here’s the thing: Facebook just might win this battle. Without a wide moat of defensible intellectual property on either side, it’s likely to be a battle of attrition here, and in such a situation the side with the bigger war chest tends to win.
Facebook, as of December 31, 2016, had approximately $29.45 billion in cash and other short-term assets in reserves. As of market close today (March 9, 2017) Snapchat’s parent company’s market cap is $28.68 billion. As of that same date, Snap Inc had approximately $987 million in cash, and has yet to turn a profit, despite considerable optimism by company leadership regarding revenue growth.
After failing to nip the threat of Snapchat in the bud, after CEO Evan Spiegel turned down a $3 billion cash acquisition offer by Facebook in 2013, Facebook now seems intent on stymying the growth of its only likely competitor. So far, it seems to be working, kind of. Recent reports suggest Snapchat’s user growth is slowing, and many high-profile Snapchat users are abandoning the platform for Instagram.
One of the few paths Snapchat has is to continue developing intellectual property and unique, difficult-to-copy features. Because Facebook will continue to copy any purely digital functionality Snap rolls out. It can afford to play the long game. Its competitor could be gone in, well, a snap.
Note: That NYT quote came by way of Ben Thompson’s essay, The Audacity Of Copying Well. Given it was about FB copying Snapchat Stories in Instagram, it might be worth re-reading now.
