Facebook's Top 3 Company Killers
We look at three times Facebook attempted to 'kill' smaller, rival companies with its own products, and whether it has been a successful strategy so far.
Pit yourself against Facebook Inc. (NASDAQ: FB) at your peril. Many companies have tried and failed to beat away its advances.
Some have given in and sold their company to the social media giant, such as Instagram and WhatsApp. Others tried to go it alone and ultimately ended up getting crushed.
Here are some of the major companies Facebook has taken on and smashed;
Snap Inc (NYSE: SNAP) has always had a major grip on the under-25 market. This picture and video messaging app was something fresh with its funny filters and disappearing messages.
Facebook made a $3 billion cash offer to buy Snapchat in November 2013. Co-founder Evan Spiegel refused this offer, preferring to hold a number of funding rounds.
Facebook takes these types of refusals personally. It began to look at ways to integrate the best aspects of Snapchat into its own offerings. This was successfully achieved when it rolled out a function called ‘Instagram Stories’ in August 2016, effectively the same feature as the popular ‘Snapchat Stories’.
It also implemented other popular Snapchat features such as expiring pictures/videos and adding funny filter options.
A subsequent major update to Snapchat completely overhauled the app in an attempt to stop the drain to Instagram. However, it focused more on advertising visibility than prioritizing the user experience. The quest for advertising dollars was too obvious and millions of people left the app, never to return.
A single tweet from social media influencer Kylie Jenner soon after this update instantly wiped $1.3 billion from the company’s valuation.
Snap Inc. is yet to make a profit, with founder Spiegel saying that the company may never do so.
It went public in 2017, but not with much success. The all-time high share price came on opening day at $28.25 per share. The price then gradually trended downward, bottoming out at $4.82 in December 2018. It has recovered somewhat since then, now sitting around the $14 mark, with a $19.5 billion market cap.
MySpace was the first real social media platform to become popular back in the early 2000s. It looked like the real deal, having a massive presence in the market, getting a lot of publicity and having a powerful media company behind it.
At its peak in 2008, MySpace was getting 76 million unique visitors monthly at a time when social media and smartphones were in their infancies. Facebook soon arrived to spoil the party. By the end of 2008, Facebook had passed the 100 million unique monthly visitors mark.
The regular addition of new features such as social games (remember Farmville?) constantly piqued the interest of users. MySpace was a lot more stagnant, with its management team full of MBAs and industry knowledge believing that its slow and steady approach would outlast Facebook.
Facebook’s reactive approach gave people what they wanted. The success was led by college kids who supposedly lacked any business sense.
In 2011, MySpace was sold for a mere $35 million, while Facebook now has a market cap of $513 billion.
WhatsApp co-founder Brian Acton was refused a job with Facebook in 2009. The software engineer decided to fully throw himself into the startup space with his new messaging app.
By 2014, Facebook was buying WhatsApp for $16 billion in cash and stock, with the two founders getting up to $3 billion worth of restricted stock units.
While this was a handsome pay-off, if the founders did not accept Facebook’s offer then WhatsApp could have gone down the same path of Snapchat. If refused, Facebook was lining up Facebook Messenger to compete with WhatsApp, similar to how Instagram was used to cut down Snapchat.
As you can see, Facebook is a formidable force to deal with. While it makes generous acquisition offers, if it is met with refusal, all bets are off.
Other sectors Facebook is now targeting include video chat with its new Portal device, television with Facebook Watch, e-commerce with Facebook Marketplace and online dating with Facebook Dating.
Facebook will do whatever it takes to strip the best aspects of a given platform and implement them into its own offerings. There isn’t much left behind in the aftermath.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Facebook and Snap Inc. Read our full disclosure policy here.