Facebook Shouldn’t Be Allowed to Buy Tbh

https://stratechery.com/2017/why-facebook-shouldnt-be-allowed-to-buy-tbh/

by kawera • 9 years ago

315 107 9 years ago

corobo2• 9 years ago

“When we met with Facebook, we realized that we shared many of the same core values about connecting people through positive interactions. Most of all, we were compelled by the ways they could help us realize our vision and bring it to more people.”

At this point I read gushy messages like this as "We made this app specifically to be purchased by Facebook". From that perspective they were never a competitor to Facebook so in this specific case no big deal that Facebook bought them out

jonny_eh• 9 years ago

Ya, this app doesn't seem like it has much legs. But then again, I said the same about Instagram and Snapchat when they first launched.

yeukhon• 9 years ago

Right, Tbh is bought only because FB is trying to retain those < 20 years old right now. However, I raise my eyebrows when I think about "never a competitor". So why buy Tbh anyway? Sorry to be rude if at all... I am betting Tbh will eventually go out of business if FB doesn't acquire Tbh. Snapchat can build similar product too, like FB and Instagram built Story to compete with Snapchat's.

robryan• 9 years ago

Hedging against that small chance they get really big. Why risk another snapchat if these guys getting traction can be bought off cheaply now.

Freak_NL• 9 years ago

So why buy Tbh anyway?

It doesn't have to be a potential competitor to pre-emptively buy, it just has to have access to the teenager demographic.

corobo2• 9 years ago

If you see a site like Facebook haemorrhaging users from a specific demographic, target that demographic successfully with anything vaguely social and I'd bet cash money Facebook will scoop you up within a couple years. I don't know if this Tbh site actually did that on purpose, but I wouldn't be surprised in any way if they did.

snarf21• 9 years ago

As tbh fades in popularity, they will roll this into FB (and Instagram and WhatsApp and......) as a feature and hook these users that are less FB addicted into their ecosystem.

Also, Facebook is an advertising company. They now can push a lot more teen and tween brands to advertise bigger campaigns.

htormey• 9 years ago

FB thinks about apps like tv channels. If you look at the top 10 free apps all of them are owned by either Facebook, google or Snapchat (they own Bitmoji).

TBH was the only app in the top 10 not owned by one of these 3 so the acquired it.

TBH could be a feature of either Facebook or Instagram in the same way that most of the history channels content could be just shows on other tv channels.

These things exist or will continue to exist as separate entities because it’s more profitable that way.

onion2k2• 9 years ago

Most VC companies don't see tech startups as 'unicorns in waiting'. They see them as '5 years growth hacking and 3 more rounds until a 10x acquisition'. At this point in time for the majority of founders the only reasonable exit strategy in tech is selling to an existing company. Putting 'getting to IPO' in your pitch deck won't work. If you're serious about building something successful then aligning with a potential buyer really early and pushing your company to be something they'll both notice and want to buy makes a lot of sense.

debaserab22• 9 years ago

If that's true, than I think Silicon Valley as we know it (knew it) is dead.

Who are the modern day unicorns?

manigandham4• 9 years ago

Yes this is PR speak. These companies have 2 possible exits:

1. Get big enough to build and scale an ad network and other services

2. Get bought by an existing scaled network

Option 2 is far easier which is why startups/VCs optimize for it. FB benefits by letting them do all the experimentation and then acquiring when they have proven traction, effectively gaining control of the new users for less money than competing outright, while the founders get a nice payday and move on.

What gets really interesting is when the same VCs behind FB are the ones kicking off these new experiments, a nice little money machine once you're in the loop.

vog3• 9 years ago

I hope this doesn't sound too snarky, but ...

If option 2 will become illegal in the future, would that mean that startups would have to optimize to turn into real companies? You know, that kind of company that need to be profitable on their own? And perhaps, but only perhaps, with a sustainable income?

perseusprime11• 9 years ago

No disrespect to Tech Accelerators but I thought getting bought by Facebook and Google are very much preached when you are at these accelerators.

cocktailpeanuts• 9 years ago

There are indeed many founders who specifically build companies just to cash out through acquisition, but from my experience there are way more founders who don't come from this point of view.

What really happens is these founders are focused on the product and don't really think much about the business model. This is understandable and actually much better than MBA types who spend months planning for stuff without even building, but the problem is there isn't really a good business model for these types of companies.

The only viable option is ads, and even this has been monopolized by big techcos so it's not easy.

Most founders don't even get to worrying about this point because their companies never take off. But the ones that do, come to a point where they need to make a decision whether to sell out or to find a viable business model.

Like I said, finding a viable business model is increasingly becoming difficult for consumer apps that rely on ads, so these companies tend to cash out.

From outside it may look like a bunch of "tech bros" hoping to strike it big with minimal effort but that's mostly not the case if you look inside. If you're curious, look up what this TBH company went through before having this "overnight success".

jerrre• 9 years ago

The only viable option is ads

I know I must get with the times or whatever, but man this is sad. Essentially every consumer social app creator is just working for the ad industry, or for free.

bko• 9 years ago

We made this app specifically to be purchased by Facebook

This will encourage more niche social networks for the purpose of being bought and Facebook's acquisitions will be costly, both financially and operationally. I don't think acquiring competitors is an effective long term strategy

wsinks• 9 years ago

Cisco has acquired 200 companies since its foundation. It's not their only strategy, but it does keep the company half competitive.

SmellyGeekBoy• 9 years ago

It seems to have worked out pretty well for Microsoft.

EGreg• 9 years ago

More like "Ooh we had no idea but when FB approached us it suddenly became clear we had soooo many shared values, it just made sense that FB would buy us."

jliptzin• 9 years ago

When I read statements like this what I actually see is the following:

"When we met with Facebook, we were impressed with the huge pile of cash that they offered us. Most of all, it was very green and crisp, and smelled like cash it supposed to smell, so we were compelled by the ways this cash could help us realize our vision of getting rich."

jonknee• 9 years ago

I read it more like "Facebook made it clear they could duplicate our app in a weekend, then extended a take it or leave it cash offer".

Omnius• 9 years ago

You say that like it's a bad thing.

amrrs• 9 years ago

This article raises a very fair point of M&As happen in such a way to bypass Antitrust intervention and how FB has been constantly succeeding in not letting the next FB come up. Seems Mark has learnt a lot from what Yahoo! failed doing.

Scea91• 9 years ago

Does anyone know of a situation where a company was not allowed to be sold to another company and then it went bankrupt in a few months/years? I think they would have a right to feel wronged in that case.

I myself see value of Antitrust interventions, but I also believe in not intervening in the market unless it is absolutely necessary. Since I haven't heard about Tbh to this moment, I don't think that this is the case.

rahoulb• 9 years ago

Though the point made in the article is by then, when the app has lots of attention, it’s too late (using the office of fair trading and Instagram as an example)

nikcub• 9 years ago

There were attempts at airline mergers just before 911. US Airways and United were going to merge but the deal didn't get approved.

Both ended up filing bankruptcy some point later, and since then the airlines have largely merged from a very diverse field into American, Delta, SW and United.

The other example is in investment banking - previously the retail and investment banks weren't allowed to merge and many of them got into trouble. Today, after the financial crisis, the industries have consolidated around 4 or 5 major large and broad banks.

WillPostForFood2• 9 years ago

Worldcom / Sprint merger was blocked by regulators and Worldcom went bankrupt a couple years later.

Another good one was Blockbuster / Hollywood video which was blocked in 2005, and it didn't end well for either side.

taneq2• 9 years ago

For anyone else who wondered, Tbh is apparently some kind of mashup of YikYak and SurveyMonkey which lets you send warm fuzzies anonymously to your friends.

amigoingtodie3• 9 years ago

When explained like that, it sounds brilliant.

Animats2• 9 years ago

Facebook's next target: Craigslist. There's a new "Local Products" section.

jacobush• 9 years ago

Ah. Finally Craigslists strategy of leaving money on the table may hurt them.

isatty• 9 years ago

This'll really suck.

Animats2• 9 years ago

Wait until Facebook gets into rental real estate.

ballenf2• 9 years ago

Is cragslist usable where you live? Last 5 times I've gone there looking it's 98% dealers in every category, especially the non-dealer ones.

If I want to buy from a used ______ shop, I wouldn't be on Craigslist.

And in certain categories, your legitimate ad (anything Apple in particular) will get insta-flagged because it's competition. And then you'll get a call from the likely flagger, who's a dealer trying to score a cheap deal and resell. They post the same ad 5-10 times a day, so there's no hope in weeding them out.

Craigslist evidently doesn't really care, so I have to wonder if thefacebook (tfb) can do a better job. All the startup reselling apps are filled with soiled couches and old gym bags. They're like going to a yard sale after all the good stuff is gone. This is in the US southeast, so I'm sure it's different on the coasts.

Regarding tfb buying tbh... the antitrust laws are in dire need of reinterpretation from the Supreme Court whether it's in this case or something substantial it doesn't matter.

astdb• 9 years ago

Shoutouts to Snap

shubhamjain• 9 years ago

All social networks should be required to enable social graph portability — the ability to export your lists of friends from one network to another. Again Instagram is the perfect example: the one-time photo-filtering app launched its network off the back of Twitter by enabling the wholesale import of your Twitter social graph.

This reminds me how importing your email contacts was major component for Facebook—or any social network at that time, for that matter—to grow its network. It made sense then since all your communication (weather with friends or family) happened over email; email was your social graph. It's scary how Facebook now holds the key to every (close) connection you might have with Facebook, WhatsApp, and Instagram.

WillPostForFood2• 9 years ago

I think people forget or weren't around when Facebook was aggressively importing not just email, but anything with a contact list (like AOL IM), then would spam the entire list. They got away with stuff that wouldn't fly today.

jraby3• 9 years ago

Messenger still pulls crap like that.

isolli• 9 years ago

Linkedin is the worst, in my experience. I was repeatedly shocked to find people in my suggested contacts list that should never have been there.

TremendousJudge• 9 years ago

They got away with stuff that wouldn't fly today

Linkedin manages to be even worse than facebook in that regard, even today

user5994461• 9 years ago

The facebook app is gathering all contacts on your phone for many years, they didn't wait for whatsapp.

maccard• 9 years ago

Not on iOS they weren’t.

cabalamat3• 9 years ago

All social networks should be required to enable social graph portability

Not just that, they should be required to export all public data/posts in a neural interchange format, so that othwer apps/companies can buitl on nthier data.

Legogris• 9 years ago

This is one part of GDPR: https://ico.org.uk/for-organisations/data-protection-reform/...

GhostVII• 9 years ago

Facebook already has a pretty easy to use API that gives you access to the major user facing data. So I don't see what the problem is.

sschueller• 9 years ago

Are 5 million users really that much these days for a free app? Especially with the enormous amount of people who own a smart phone.

pavlov• 9 years ago

Considering Tbh's constrained target age group and geography -- North American teenagers -- it sounds like a decent amount.

avip• 9 years ago

The more interesting question is how many users is 5MM "users". It could be anything between 5K and 5MM.

wellboy• 9 years ago

Yes, it's a lot. If you can create an app and get 5 million users on it that people are using frequently, then you can sell it for around $20/user-$30/user. This is around the standard number for social network apps and somewhat lower for games and apps without a network effect.

taneq2• 9 years ago

How is that number generally justified? Marketing opportunity, data collection? It seems like a lot per user.

y04nn• 9 years ago

I don't think the acquisition price is base on the number of users but the potential users in the future and the value of each user. Considering the growth mentioned in the article and the young user age, it's not that surprising.

jondubois• 9 years ago

tbh is obviously a trendy app with a short shelf life. Based on the descriptions, I don't think it should last much longer than the 'Yo' app.

There is definitely something wrong about Facebook using its position of power to buy up crappy companies for millions without suffering any ramifications whatsoever.

It's definitely costing shareholders something but the sheer power and inertia of Facebook means that the loss is imperceptible in the grand scheme of things. Facebook really can print money out of thin air it seems.

I actually think that if Facebook did not buy Instagram or WhatsApp; both of them would have died out. Even Kevin Systrom alluded to this when he was asked if he regretted selling Instagram to Facebook. Just wait and see what will happen with Snap... Assuming Facebook doesn't buy it.

It looks like Zuckerberg never makes bad deals but I think that it's just the inertia of Facebook that makes it impossible for a deal to go bad.

Whenever I read about a Facebook acquisition, I roll my eyes because it tends to be very random... And yet it seems to always work out.

Even the software tools and frameworks that Facebook pushes out are instant runaway successes. Even Google doesn't compete on that field despite having much more experience in this area... And as a developer, I think that Google tools and frameworks are better too.

lmm• 9 years ago

Maybe Facebook just executes better than Google? Having talked to people who work at both about the languages and tools they need, it seems like Facebook is a much better environment to be a developer in.

denzil_correa• 9 years ago

Whenever I read about a Facebook acquisition, I roll my eyes because it tends to be very random... And yet it seems to always work out.

It seems to be random but it is not. Facebook stealthily uses data from mobiles to determine popular apps [0].

[0] https://outline.com/WnGGRk

jen729w• 9 years ago

I still use 'Yo'. For one very specific thing: telling my gf, who lives directly over the road, that I'm leaving the house and that I'll meet her out front. Nevertheless, there it is.

randomblob• 9 years ago

A hopeless romantic...

coldtea7• 9 years ago

When the 20000000 other available options won't do, Yo is irreplaceable!

pritambarhate• 9 years ago

The parse.com acquisition didn't go so well.

ballenf2• 9 years ago

Unless killing it off was exactly the goal. That came out more conspiracy theory than I intended, but the point is "success" is hard to measure without knowing a lot more.

origami777• 9 years ago

WhatsApp would be around but the product would likely have had to adopt a business model by now. They were charging some people but i don’t think it was much.

Phenomenit• 9 years ago

How is this a competitive market if the big five buy all competition before they become a threat? And then they release articles saying that small companies don't matter. The small companies are the only ones who add something to the market.

rf15• 9 years ago

it's clearly about the competition between startups to get bought!

...but yeah this neither particularly fair, competitive nor free in the market sense, is it?

We should definitely work towards improving the current laws against anti-competitive behaviour.

ComodoHacker• 9 years ago

Interesting point:

prohibiting the permissionless sharing of personal information in fact entrenches Facebook’s position. Take, for example, Europe’s vaunted GDPR law: as I explained in the Daily Update, data portability that, for privacy reasons, excludes the social graph (because your friends didn’t give you permission to share their information with other services) makes it that much harder for competition to arise.

hienyimba• 9 years ago

Everyone fails to recall the Startup had been struggling for almost 7yrs. The buyout was a big Hail Mary move for their long-suffering

Facebook Shouldn’t Be Allowed to Buy Tbh

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