As Internet usage shifts from desktop computers to mobile devices, rival social services are the ones offering innovative ways to share photos and videos as well as to communicate with friends. Given the huge advertising business Facebook has grafted onto such activities—generating $1.2 billion of revenue in the first quarter alone—it is problematic if users migrate elsewhere.
The latest hot social service is Vine, a smartphone app that makes it simple to record and share snippets of video. Owned by Twitter, Vine’s app is ranked among the top 10 for the iPhone and has gathered more than 13 million registered users since launching in January.
That may equate to a tiny fraction of Facebook’s user base, but Chief Executive Mark Zuckerberg knows how to spot a threat. On Thursday, he announced that Facebook-owned mobile app Instagram would adopt Vine-like video features.
Indeed, Instagram is the cautionary tale Mr. Zuckerberg wants to avoid. Facebook was losing users to the app and so ended up buying it in a billion-dollar deal.
Snapchat is another photo-sharing app, particularly popular with teens, that threatens Facebook. Facebook has also mimicked Snapchat with its own mobile app called Poke, which never caught on.
The good news for Facebook shareholders is that while it is fairly easy to copy rival services, it will be very difficult for rivals to replicate Facebook’s gigantic user network. For example, when Facebook adopted a feature made popular by Foursquare, namely the ability to tell friends where you are by “checking in” at a location, it undercut that startup’s momentum. Any service based on sharing is more valuable if you can do that sharing with more people. And no service can compete with Facebook’s user base of 1.1 billion monthly active users.
The sheer breadth of sharing tools offered by Facebook, coupled with its huge user figures, means it stands alone in terms of the time users spend with the service. The aggregate time spent on its mobile app, for instance, is double that for its closest rival, according to comScore. In another sign that use of its services isn’t declining despite rivals’ growth, the percentage of Facebook’s active users that access it daily is on the rise.
The bad news is that some rivals are achieving scale rapidly. WhatsApp, a popular smartphone-messaging service that competes with Facebook’s “Messenger” app, is just four years old yet sports over 250 million monthly active users. It is very quickly building a social network, one that is arguably more valuable than Facebook’s since it is based on users’ smartphone address books. That is the ultimate “friends list,” since people keep it updated with those they contact most frequently.
Decreased usage of its services is exactly what Facebook risks as others outpace it on innovation. In the mobile age, viral growth is possible on a scale that can threaten even the most dominant players.
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