The New Copycats: How Facebook Squashes Competition From Startups

http://news.morningstar.com/all/dow-jones/us-markets/2017080910924/the-new-copycats-how-facebook-squashes-competition-from-startups.aspx

by petethomas • 9 years ago

212 96 9 years ago

news.morningstar.com

bhouston3• 9 years ago

Facebook is what Microsoft was in the 1990s. Using its existing market dominance to crush potential competitors by offering their distinctive offerings as mere features of its existing popular products.

This did lead to a lot of momentum to the anti-trust proceedings against Microsoft.

I wonder if that encourages Facebook to not do this so obviously in the future? Or maybe it isn't at all worried about anti-trust for the near term.

I am sure Google, Amazon and Microsoft continue to do doing this as well, but it seems that Facebook is doing this most successfully or at least most prominently with its total destruction of Snap.

I guess it is different in that Google and Facebook both have very effective means to accurately measure adoption trends of new successful market entrants, and thus can target these entrants better than ever before with total destruction.

This is just killer:

In December, Facebook began its group-video-chat offensive. Its Messenger app introduced the feature with the ability to see up to six people in a conversation, compared with the eight-person rooms on Houseparty.
In February, Facebook invited Houseparty users between the ages of 13 and 17 to come to its offices in Menlo Park, Calif., to participate in a study and keep a diary for a week afterward that they would share with Facebook, offering as an inducement $275 Amazon gift cards.

tyingq• 9 years ago

am sure Google, Amazon and Microsoft continue to do doing this as well, but it seems that Facebook is doing this most successfully or at least most prominently with its total destruction of Snap.

"Most successfully" is probably hard to measure. While Snap is perhaps the single largest example, both Google and Amazon may have had greater overall benefit of this approach...just in a longer tail way that's hard to quantify as a single big visible event.

How much revenue, for example, has Google extracted from the travel market?

sharemywin• 9 years ago

-adding pictures of products to the search results.

launchtomorrow• 9 years ago

As much as they've charged advertisers on all travel related keywords. I would guess in the billions, as an order of magnitude.

AndrewKemendo2• 9 years ago

I think people forget that the MSFT v US outcome had very little affect on Microsoft. They took it to appeals court and won.

Microsoft would settle the case with the Department of Justice in November of 2001 by agreeing to make it easier for Microsoft's competitors to get their software more closely integrated with the Windows operating system

http://time.com/3553242/microsoft-monopoly/

sircastor• 9 years ago

I remember reading/thinking/hearing that this was closely tied to the change in administration. The Clinton administration, pushed the Justice Dept to prosecute, whereas the Bush administration encouraged the Justice Dept to ease off. That's speculation though without evidence to back it up.

frik• 9 years ago

It had a big effect for a short timeframe. Look at photos of Bill Gates, he aged like 15 years in just three years time. And he stepped off as CEO.

It followed Ballmer, a softer CEO timeframe. Now Gates with his strawman Nadella got back the power.

adventured• 9 years ago

In fact it had an extremely large negative impact on Microsoft. To know that, all you have to do is read / listen to [1] actual interviews from people that worked there through those days. It was very hard on the company and its employees.

The culture was forced to change substantially. Their behavior was monitored by the government for years after. They were no longer able to aggressively compete without chains on their strongest points of leverage. At a time when IE had conquered the browser market, they couldn't use that new monopoly point to attempt to crush Google as one example (which is exactly what they would have done in the late 1980s or early 1990s). It's the same type of restrictive blanket that was put on Intel by the US Government in exchange for allowing them to keep their monopoly.

[1] https://www.bloomberg.com/news/audio/2017-07-28/rich-barton-...

mathperson2• 9 years ago

destruction of snap? yeah the share price is down but I wouldn't call it 'destroyed'. still has a lot of users

bhouston3• 9 years ago

Its fundamental reason for being has been replicated successfully by the market dominant social platform -- that is pretty killer. Snap may figure out a way to pivot to recover its shareholder value but it won't be easy nor is it obvious how they will do this.

lkrubner• 9 years ago

In the USA, there won't be any major anti-trust initiatives while Trump is President, so the main worry that Facebook has to think about is whether the European Union might take action. But in Europe they've so far been willing to regulate American tech giants, without attempting to break them up. There's also little precedent for the European Union actually breaking apart a company that is headquartered in the USA. I can foresee some fines for Facebook, but nothing they can't manage. They'd probably be happy to pay some fines, so long as they get to keep their monopoly.

Analemma_3• 9 years ago

I wouldn't be so sure about that. There certainly won't be any antitrust suits against his Manhattan banking buddies, but Trump has already mused about breaking up Amazon and I doubt he's a big fan of the other big tech companies either (since they certainly aren't fond of him). I would rate a DOJ action against Facebook in this administration as "unlikely, but far from impossible".

sverhagen• 9 years ago

I'm not a Snapchat user, I'm getting sick and tired of the new chat app "du jour". So, unless Snapchat offers something truly revolutionary, that was hard to develop, do I really care that Facebook offers it too, in a way that lets me stay with the social network I've already given in to?

In other words, these are often said to be easily disruptable markets. In fact, wasn't that purported to be a perpetual risk for Facebook? So, if a giant is disrupted by a startup, we'd all cheer for that? But if Snapchat is disrupted by Facebook, we scream bloody murder, 'ey? (I don't like big corporations or monopolies, but I was hoping to point out a form of hypocrisy, along with a desire to not switch social networks too often.)

LoSboccacc2• 9 years ago

Social network speaking, you're old and committed. Snapchat started to worry facebook when the 13-17 demographic moved there, showing momentum that could have snowballed into being the de facto gen-z social network.

That demographic is relatively free to chose whichever network to grow up with, according ro where the majority of the cool kids throwing partyes and living the life are.

Old users are less active on average and more adverse to advertisement, so getting constant new blood is quite inportant to fb

SN76477• 9 years ago

Sounds like time to break them up!

ValentineC• 9 years ago

For anyone stuck in front of a paywall: http://archive.is/LUAA8

madsbuch• 9 years ago

Yep, it would be nice if HN restricted pay walled articles...

briandear• 9 years ago

Or the Atlantic. Apparently they restrict access if you are in Firefox private mode or if you block tracking. I get it they need to sell ads to survive, but me seeing an ad is much different that me giving permission to track or load third party JavaScript.

dvfjsdhgfv• 9 years ago

Non-paywalled link: http://news.morningstar.com/all/dow-jones/us-markets/2017080...

dang• 9 years ago

Thanks. Changed from https://www.wsj.com/articles/the-new-copycats-how-facebook-s....

noncoml• 9 years ago

New? Isn't that what MS used to do in the 90s?

sds2• 9 years ago

They changed their strategy?

xbmcuser• 9 years ago

Facebook has been buying all social networks it feels are a competitive threat to it. First it bought insta then it bought WhatsApp it tried to buy Snapchat wasn't successful so copied it in insta. One of the things I read a lot on hn is how Facebook has killed privacy and people try not to use it etc. But I personally stopped using Facebook not because of privacy concerns but because Facebook has been making an open web into a private web. And more and more stuff that in the past would have been on company websites is available on Facebook alone and sometimes not accessible without a Facebook account.

heymijo• 9 years ago

What struck me from the article was how facebook knew what social networks are competitive threats. They're tracking what apps you use on your phone.

"Facebook uses an internal database to track rivals, including young startups performing unusually well, people familiar with the system say. The database stems from Facebook’s 2013 acquisition of a Tel Aviv-based startup, Onavo, which had built an app that secures users’ privacy by routing their traffic through private servers. The app gives Facebook an unusually detailed look at what users collectively do on their phones, these people say.

The tool shaped Facebook’s decision to buy WhatsApp and informed its live-video strategy, they say. Facebook used Onavo to build its early-bird tool that tips it off to promising services and that helped Facebook home in on Houseparty"

willstrafach6• 9 years ago

To add context: Other companies, such as App Annie, offer free VPN services (under a different company name) in order to track this type of engagement data. It appears to be very valuable.

HugoDaniel• 9 years ago

The dream of the open web is long gone. IMO it started to fade when google ditched their reader (rss/atom) in prol of g+ :(

AndrewKemendo2• 9 years ago

While getting acquired can be “a very good win for the founders, that might be at the expense of a more competitive landscape.”

I think about this a lot and at the end of the day a founder has to decide if they care about their own payday or the broader ecosystem/market of independent products.

If you fall into the latter camp, then assuming you are even successful in the market, you should prepare to die by your sword. Otherwise, the big 5 just keep getting bigger with more advocates and authority.

You could argue that joining them will be better in the end because you just bide your time and leave to start something even bigger, but the reality is you'll have the same dilemma in the future. So why wait to take a stand and try to compete?

The real question is if it's even practically possible to compete. Given that VC are generally too timid to fund anything which could get beaten by the big ones, there aren't a whole lot of options to growth fund something which really could compete.

frgtpsswrdlame• 9 years ago

I think about this a lot and at the end of the day a founder has to decide if they care about their own payday or the broader ecosystem/market of independent products.

I think the solution has to be in fixing the system. As long as we're saying this is a competitive, free market but only so long as the individuals in it act in the interest of everyone and not just themselves then we're doomed. We need some wide ranging updates to the antitrust literature.

iamleppert• 9 years ago

I'm sorry but if your product can be easily copied by Facebook, you don't really have a product.

There was once a time when video chat was novel, but now since the technology is "done", there is nothing hard about developing these services from a technical perspective. Handling scale and various other things with these products used to be a challenge but now we have the cloud, API's and a mature ecosystem. The world really doesn't need more of the same kinds of communication apps, it all just becomes a gimmick and less of a utility.

So, most of these products will be successful based upon other factors -- such as the cleverness of their marketing, or whether or not they serve a niche that is lucrative enough and underserved enough on which to build a successful business, but not large enough to attract the attention of one of the goliaths.

The one advantage startups have over large corporations like Facebook is their size and speed at which they can move. Engineers at Facebook, like any large tech company, are encumbered by substantial process, political forces, and a reluctance to try new ideas. Your typical startup employee is also far more motivated than an engineer who just wants to be given their daily JIRA tasks. To be honest, why does a single app need a team of 500 (frontend) engineers in the first place? When a tech company gets large, it becomes more about business than technology, anyways.

So, it doesn't come as much of a shock Facebook is turning to the startup world to source their ideas and duplicate them, which is why I advise all my friends to steer clear of any of these "we're a better way to share/video chat/chat/message/communicate" startups. Only go to one if you have some burning technical itch. The one exception is if the founders aren't totally delusional and the company operates more under the impression of just getting an MVP built, with the idea of shopping it around to be acquired in short order. And in this case, know exactly how long that's going to take, take no VC funding, have no delusions of grandeur and as an engineer know exactly what cut you're going to get when the thing gets sold. I've only seen this work if the founders know someone at the big company and the thing has all been basically pre-arranged though.

xenihn• 9 years ago

I'm sorry but if your product can be easily copied by Facebook, you don't really have a product.

Most things can be easily copied if you throw enough money and developer hours at it

bhouston3• 9 years ago

Most things can be easily copied if you throw enough money and developer hours at it

I would argue everything can be copied from a technical standpoint (excluding patent issues.) Marketing and user adoption may or may not be successfully copied though.

neerkumar• 9 years ago

When FB bought Whatsapp, Whatsapp was handling 20 billion messages a day and was the #1 app on the phone pretty much anywhere in the world, except for US, China, and Australia (it still is). Not that they needed some tool to find that out.

FB did an amazing job in keeping their acquisitions fairly independent and let them keep grow. That's something really hard to do and they deserve credit for that.

It is easy to buy the #1 messaging app in the world, if you have the money. It is hard to make sure those people still stay motivated after the acquisition.

bitL• 9 years ago

WhatsApp's secret was that they struck deals with many operators world-wide to provide their messaging for free instead of counting it as Internet usage (look at Brazil for example). Not sure how did they achieve it but that for sure propelled them to #1 in many countries.

mi100hael• 9 years ago

Considering how text messages and smartphone data usage have become far more popular than telephone calls, transmitting those messages via HTTP alongside other data traffic is probably cheaper than building out & maintaining a bunch of extra SMS infrastructure to handle the load.

https://en.wikipedia.org/wiki/Short_Message_service_center

abalone6• 9 years ago

Facebook uses an internal database to track rivals... The database stems from Facebook's 2013 acquisition of a Tel Aviv-based startup, Onavo, which had built an app that secures users' privacy by routing their traffic through private servers. The app gives Facebook an unusually detailed look at what users collectively do on their phones...

WTF is this shady-ass sh*t. Way to "secure users' privacy," Facebook.

From the sound of Onavo's App Store reviews they are using deceptive marketing of the "Your phone is infected, install this now!!" variety. Yet they have a lot of positive but suspiciously brief reviews balancing them out. So Facebook bought a company that MITMs unsuspecting users for profit, using scammer marketing techniques and fake reviews to drive installs, then leverages that to knife babies. "Don't be too proud," indeed.

I hope there is cause for Apple to remove this app from the App Store (like deceptive marketing or exploitive practices). Or for a bunch of us good folks to leave negative reviews. These guys depend on informed people avoiding these apps and not leaving reviews.

smarx0072• 9 years ago

Support everything said except for MITM. They do not intercept anything, just gather the metadata on the frequency of use, amount of traffic sent etc. And users install those apps to see traffic stats. I am pretty sure they share this info according to the ToS. Just a plain old "if you're not paying for it, you're the product".

Edit: they also gather this data even if you don't use their VPN service. But I don't think average users care that much if Facebook knows the distribution of time spent on Twitter by all people using that app.

abalone6• 9 years ago

You have to intercept to gather metadata... but semantics aside, they are deceiving users.

First there is the marketing scam reported in the app store reviews, people who installed it because some web site told them they have a virus and they need this thing to fix it.

Second, the only mention of their logging practices is buried below the fold in the last line of their description: "Onavo receives and analyzes information about your mobile data and app use." This is just vague enough to deceive a user that believes it is merely to support their user-facing features, i.e. giving you a report on what you use... not Facebook for spying purposes. Of course, most users never even get that far in the description. They're installing this to "secure their phone" because of a scary ad they saw.

These guys know exactly what they're doing. Most of their users, not so much. That's where we come in. The App Store exists to help protect users from this kind of exploitation and I hope Apple and our community takes action.

yellow_postit• 9 years ago

This is more detailed data it sounds like but fundamentally how is this different than obsessively monitoring app Annie for which apps are gaining traction in your space?

abalone6• 9 years ago

Totally different. App Annie does not snoop on users.[1]

[1] https://stackoverflow.com/questions/20014123/how-does-appann...

willstrafach6• 9 years ago

It is exactly the same as what App Annie does with VPN Defender.

kyledrake• 9 years ago

This isn't even the only Tel Aviv based "proxy" shadyware company that's being used for criminal activity by spammers and botnets: https://luminati.io https://hola.org/

nnq• 9 years ago

The way these two faces of the same company use same logo with different colors is so funny...

ballenf4• 9 years ago

Apple just booted all these apps off the Appstore, supposedly because they somehow didn't notice that there were dozens of apps installing VPN profiles to block ads or "improve" privacy. (There were a few good ones, but most were thinly veiled spyware.) And that these apps were all violating the rule against misuse of the intended functionality of device features -- which is certainly true but wasn't being done surreptitiously.

You have to wonder how many of those apps had deals to sell "anonymized" data to FB or Google and whether Apple saw this as a threat to its platform or products. Many of the TOS's could have been read to allow even raw data going to an "affiliate" which FB could easily have become for any number of them.

This coming on the heels of removing native FB support in iOS 11. Although, that was likely unrelated to data leakage.

willstrafach6• 9 years ago

This is absolutely not true, all such apps are still live.

puranjay2• 9 years ago

Now that Zuck is planning a Presidency run, I wonder if all his shady stuff will come out

dyarosla• 9 years ago

Spreading rumours as truth isn't helpful here.

em3rgent0rdr• 9 years ago

This is why you should only use open source software if you are concerned about privacy.

yuhong• 9 years ago

Looks like it was not originally advertised as a privacy tool: http://web.archive.org/web/20111021230906/http://www.onavo.c...

grdvnkootcvj• 9 years ago

so the question is: how does a new social app compete against facebook? how do you beat them in the end?

nanomonkey• 9 years ago

You could have a decentralized social app, like secure scuttlebutt.

cft• 9 years ago

It is very difficult to make a significant social app these days, mostly due to Facebook's collection of apps. Almost impossible.

prostoalex• 9 years ago

As opposed to what? A game, a music app, an education app, a commerce app? The mobile apps are a mature ecosystem in a fairly saturated market, the days of Yo and others reaching the tops of the app stores are long behind.

jitix3• 9 years ago

Houseparty says its growth had been stymied by the app’s crash, which slowed its ability to introduce new features and attract new users.

This is why horizontal scalability should be a basic requirement in such a product. These days there's a blanket statement used throughout the industry that premature optimization is bad. It is bad if you're developing a website or a stand alone mobile app. But if you're doing something in communications field (or data, IoT, etc.) scalability is a must-have.

Analemma_3• 9 years ago

I think this is a damned-if-you-do, damned-if-you-don't situation though. Scalability doesn't come for free, in a small startup it usually costs you velocity (hence: "Do things that don't scale"), and with Facebook breathing down their necks that may not be a luxury they could afford.

jitix3• 9 years ago

But since video chat is quite commoditized building a scalable system from ground up would have helped them counter facebook by quickly building features on top of what they had. The article itself mentions that they had to stop what they were doing and scale the system.

My main point was that one-size-fits-all methodologies don't suit every software project. In some cases it makes sense to build the feature first and then worry about scaling but in some cases like this it doesn't.

glitcher• 9 years ago

optimization != scalability

jitix3• 9 years ago

Optimization is generally used as a broader term than what code level optimization means. Although code optimization does help systems vertically scale.

I've seen quite a few projects fail because the engineers didn't think through the ability of the system for handling more users/connections/data. A little thought before starting the project usually helps avoid ops headache and costly rewrites later.

c0smic• 9 years ago

This reminds me how important/relevant it's becoming for people to own their data, instead of giving it up to companies to profit from and eventually sell.

Big issues I see are the vast majority of people just don't want to think about it, and there aren't any good systems in place to empower (the majority of) people to retain their data.

mankash666• 9 years ago

It's fairly trivial to get a list of potential competitive threats:

1> New apps with user base in the millions and monthly growth rate in double digit % 2> Significant VC/angel funding 3> Positive press coverage.

This data collection doesn't require violating anyone's privacy and can even be outsourced to a third party on a monthly basis for a trivial cost.

So, why are there accusations about monopolistic behavior? MSFT was trying to block competition via illegal means, like incentivizing partners to use MSFT products, or going after the competition with expensive (bogus) patent claims, but FB is doing none of that.

shmerl• 9 years ago

I'm glad I'm not using Facebook.

quocble• 9 years ago

How ironic, FB uses its data to squash competitors from an app Onavo (a company FB bought) that promotes itself to protect its user's privacy.

minademian• 9 years ago

Commend Houseparty for their resilience. Can't be easy while the cat is staring you down, planning your demise.

deftturtle• 9 years ago

Mark, if you're reading this, I want to fight you live on FB video.

SKYRHO_• 9 years ago

"Facebook uses an internal database to track rivals... The database stems from Facebook's 2013 acquisition of a Tel Aviv-based startup, Onavo, which had built an app that secures users' privacy by routing their traffic through private servers. The app gives Facebook an unusually detailed look at what users collectively do on their phones..." - More Privacy Concerns

Wait!.. you mean an app(like facebook) where users voluntarily enter the intimate details of their personal lives doesn't respect their privacy? Sorry for the bias folks, but facebook users typically don't respect even their own privacy.

Kequc• 9 years ago

Facebook unapologetically breezed through every privacy scandal I can even imagine. It will be remembered as a prolific piece of Pop culture, just by virtue that few enough people stopped using it.

jgalt212• 9 years ago

Neat hack: trick Onavo into thinking your app is more popular or more highly used than it actually is.

subsubsub• 9 years ago

Putting to one side the slightly shady way in which Facebook found out about this new start-up for a second, I have a question.

There are examples of companies that made a success of focusing-in on one aspect of a larger successful company (e.g. the companies that split out the functionality of craigslist).

But, this feels like an example of what happens when you mistake a Feature for a Business.

How do you distinguish between the two cases?

The New Copycats: How Facebook Squashes Competition From Startups

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