Recently, the consumer internet – that group of products dedicated to building and monetizing large networks of people – has started to feel rather hype. A space that has been largely emptied over the past five years is bringing life back to life. The products are compelling enough, and growing fast enough, that Facebook and others have started trying to reverse engineer and copy them.
It’s still totally unreal to me, and yet everywhere I look there are the signs: social networks are getting competitive again.
Today, let’s take a look at this strange new landscape and talk about what it means – and doesn’t mean – for tech giants and governments trying to rein them in.
I. How did the competition end?
If I had to say when the competition between social networks in the US would end, I would pick August 2, 2016. That’s when Instagram introduced its version of Snapchat Stories, denting the momentum of an upstart competitor and sending the startup ecosystem relaxed.
I don’t think copy features are necessarily anti-competitive – in fact, as I’ll show below, it’s a sign that the ecosystem is working as intended – but the effect of Facebook copying here has been dramatic. Snap fell into a long mess, and potential entrepreneurs and investors got the message: Facebook will seek to acquire or copy any start-up social product, significantly limiting the chances of a successful hack. Accordingly, the investment diminished.
The year before, after the success of Twitter’s Periscope app, Facebook cloned its live video features, enthusiasm for both products appeared to have largely died out. When group video live was a temporary success under Houseparty, Facebook cloned it as well, later selling Houseparty to Epic Games for an undisclosed amount.
In this stagnant environment, many people, including myself, thought it was a mistake to allow Facebook to have Instagram and WhatsApp. The former became the premium social network for the younger generation, and the latter cemented Facebook’s global dominance of communication. A world in which they both remained independent would have been more competitive, even if neither of them had grown to the level they had under Facebook.
This is the basic thesis of the FTC’s antitrust lawsuit against the company, which it filed in December. The government argues that Facebook “unlawfully maintains its monopoly on personal social networks through a long trail of anti-competitive behavior” and, if successful, could force Facebook to sell Instagram and WhatsApp. It is a difficult issue. As Ben Thompson explains here, the government’s attempt to define the market in which Facebook competes to establish its monopoly is rather torture.
You might think the FTC’s case against Facebook is weak and you also think that the period from 2016 to 2021 saw remarkably little innovation among American social networks, at least in terms of the core user behaviors that it inspires. The market for social products has become highly concentrated; Facebook and Google built a double monopoly on digital advertising; Its sheer size and unexpected effects helped provoke a global backlash against American tech giants.
If you think this is a problem, like me, you can argue one of two basic ways to fix it. The first is government intervention, in the form of an antitrust lawsuit or new regulations from Congress, that would regulate the ability of tech giants to take over smaller companies, create new barriers to market entry, or compete on fair terms. The second is to do basically nothing, with the confidence that the inevitable nature of the universe and the relentless march of time will eventually bring the competition back.
If the second option seems absurd, it is not without precedent. In the late 1990s, Microsoft’s dominance of the PC market led the government to pursue an antitrust case over the company’s move to bundle its Internet Explorer browser with the Windows operating system. The fear was that such assemblies would give Microsoft complete power over the consumer PC market forever. In fact, of course, overseas mobile phones were just waiting to be mastered, then Apple came and did just that, and now no one really worries about Microsoft’s power over the PC market.
I wish the US government would have stepped in around 2016 to explore new regulations for mergers and acquisitions of tech giants. In his absence, we can only bet on entropy – and whatever opposing capitalists still feel they can challenge Facebook in the market despite its many advantages.
But the thing is, a bunch of dissenting capitalists did. They have recently had great success.
Secondly. How did the competition begin?
Facebook’s biggest competitor in 2021 is, of course, TikTok, which has been capturing usage from Facebook’s suite of apps since its launch in the US in 2018 (after merging with Musical.ly).
TikTok started by making it a lot easier for people to create compelling videos, splitting fame and fortune through an incredibly compelling central feed even if you don’t know or follow a single person, and eventually created a whole world of audio memes, visual effects and community jokes.
Eugene Wei, our top writer and thinker on TikTok, published Part 3 of his series of articles on the app on Sunday night. Among the many highlights that Wii points out is that the sheer number of forces that contributed to TikTok’s success have made it difficult for Facebook (or YouTube) to clone it. he is writing:
People will sue Instagram for copying the Snapchat Stories feature until the end of time, but the truth is that the format will never be a defensible trench. The ephemeral is a clever new dimension upon which to diversify social media, but it can be easily copied.
This is why TikTok network influences are so important to creativity. To clone TikTok, you cannot clone just any one feature. All that, and not just the features, but how users post them and how the resulting videos interact with each other in the FYP feed. It repeats all the feedback loops built into the TikTok ecosystem, and they are all interconnected. You can probably copy some atoms, but the magic lives on the molecular level.
TikTok’s success is a real concern within Facebook, with employees asking CEO Mark Zuckerberg a question about it during nearly every extensive question-and-answer session. The company has published a competitor, called Reels, within Instagram, and it may find a way to succeed. But the bigger point is that, regardless of the odds, Facebook now has to compete against TiKTok or risk losing the next generation.
You may have already thought about it, though. (Unless you’re the Federal Trade Commission, which has conspicuously avoided any mention of TikTok in its full-on complaint about Facebook’s alleged monopoly.) But when it comes to short mobile video, Facebook and YouTube face a real challenge.
So where else does Facebook suddenly find itself having to compete?
For starters, there is sound. While Clubhouse is still available only by invitation, it recently achieved an estimated 10 million downloads. Celebrities like Tiffany Haddish, Elon Musk, Joe Rogan, and Zuckerberg himself have appeared on the app, giving it a rare cultural flair in a social startup that’s still less than a year old. Clubhouse raised the money last month at a valuation of $1 billion — more than Facebook eventually paid for Instagram.
Since it’s an audio app, Clubhouse isn’t quite an existential threat like TikTok: you can theoretically still browse Instagram or send corporate messages on WhatsApp while listening to a Clubhouse conversation. But Facebook was intrigued enough by the clubhouse’s rapid rise that it is now working on how to clone the app, according to a report this month in the The New York Times. Elsewhere, Twitter already has a version of the Clubhouse, spaces are called, in beta. It’s not clear if Clubhouse is a threat to either company, exactly. But both still consider it a challenge.
After years of making its most notable investments in technically challenging media that includes video, augmented reality and virtual reality, Facebook is said to be taking a second look at the script. Substack’s emergence over the past year has begun to attract a growing number of millionaires and text-based creators, with millions of people drawn away from their social feeds into the relative quiet of an email inbox. (I have a personal stake in this, of course; I started a newsletter in large part because my social feeds have become like a lousy place to get my news.)
What’s interesting here is that Facebook now appears to be open to this possibility as well. Last month , times I also mentioned that Facebook is developing newsletter tools for reporters and writers. (I confirmed this through my own sources). As with the Clubhouse, newsletters are hardly an existential threat to Facebook. But they’re running out of time and attention away from the company’s apps — and in a world where news might not even be available on Facebook in some countries, it might be wise to hedge. (And apparently Twitter thinks so too: Substack acquired rival Revue last month.)
This leaves Facebook competing with fast-growing, well-funded competitors across several categories. And while it’s at a very early stage, I think the company may soon have an interesting competitor in photography as well.
Despo is an invite-only social photo app with a touch: you can see any photos you take using the app only 24 hours after you take them. (The app sends you an instant notification to open them every day at 9am local time: among other things, a nice hack to boost daily use.) Founded by David Dobrik, one of the world’s most popular YouTubers, Dispo has been around as the primary benefactor for a year. But last month a beta version was launched on iOS with social features including shared photo “rolls”, and it quickly reached the 10,000-person limit in Apple’s TestFlight program. I raised $4 million in seed funding in October, and assuming the hype continues into a public launch, I wouldn’t be surprised if Despo took off in a major way.
Audio, video, images, and text: To some extent, Facebook has never had to stop competing across these dimensions in the company’s history. But I don’t remember the last time she had so many interesting fights At the same time.
Third. what does that mean
This is what I am Not I say when I argue that social networks are competitive again:
- Facebook has not acted in various anti-competitive ways throughout its history.
- Facebook should no longer have to be subject to antitrust scrutiny, or the US government (and, separately, a coalition of US attorneys) should drop their lawsuits.
- Given all this new competition, Facebook should be allowed to buy out competing social networks in the future.
- Facebook won’t remain the world’s largest social network for long to come, or its business will suffer in the short term.
In fact, I think there is a good reason to prove that it was antitrust pressure from the US government in particular that allowed competition to return to social networks in the first place. If Clubhouse or Substack appeared in 2013 or 2014, it’s not hard to imagine Facebook racing to get it off the chessboard. But in 2021, when Facebook faces a formal UK antitrust review over its acquisition of a failed GIF search engine, the company can only sit back and try to copy what others do best.
If so, it suggests that the half-year response to Facebook’s growing dominance over the past half-decade has brought us, however late, to a better place. Antitrust pressure made it extremely difficult for the company to make acquisitions, and opened a window large enough for new entrants to climb. It remains to be seen how any new competitors on Facebook, YouTube or Twitter can grow. But for the first time in a long time, I’m optimistic about their chances.