How social networks got competitive again
Facebook's surprising new challengers in audio, video, photos, and text
Lately, the consumer internet — that set of products devoted to building and monetizing large networks of people — has started to feel rather buzzy. A space that had been largely emptied out over the past five years is once again humming with life. The products are compelling enough, and growing fast enough, that Facebook and others have begun trying to reverse-engineer and copy them.
It still doesn’t seem quite real to me, and yet everywhere I look the signs are there: social networks are competitive again.
Today, let’s tour this weird new landscape, and talk about what it means — and doesn’t mean — for the tech giants and the governments trying to rein them in.
I. How competition ended
If I had to put a date on when competition ended among social networks in the United States, I’d choose Aug. 2, 2016. That’s when Instagram introduced its copy of Snapchat stories, blunting the momentum of an upstart challenger and sending a chill through the startup ecosystem.
I don’t think copying features is necessarily anti-competitive — in fact, as I’ll argue below, it’s a sign that the ecosystem is working as intended — but the effect of Facebook’s copying here was dramatic. Snap fell into a long funk, and would-be entrepreneurs and investors got the message: Facebook will seek to acquire or copy any upstart social product, dramatically limiting its odds of breakout success. Investment shrunk accordingly.
The previous year, after the success of Twitter’s Periscope app, Facebook had cloned its live video features, and enthusiasm for both products seemed to broadly peter out. When live group video experienced momentary success under Houseparty, Facebook cloned that too, and Houseparty later sold to Epic Games for an undisclosed sum.
It was in this stagnant environment that many people, myself included, came to believe that it had been a mistake to let Facebook acquire Instagram and WhatsApp. The former became the breakout social network of a younger generation, and the latter cemented Facebook’s global dominance in communication. A world in which both had remained independent would have been much more competitive, even if neither had grown to the scale that they did under Facebook.
This is the basic thesis of the Federal Trade Commission’s antitrust lawsuit against the company, which it filed in December. The government argues that Facebook “is illegally maintaining its personal social networking monopoly through a years-long course of anticompetitive conduct,” and if successful could force Facebook to sell off Instagram and WhatsApp. It’s a tricky case; as Ben Thompson explains here, the government’s attempt to define the market in which Facebook competes so as to prove it has a monopoly is rather tortured.
You can think the FTC’s case against Facebook is weak and also believe that the period from 2016 to 2021 saw remarkably little innovation among American social networks, at least in terms of the basic user behaviors that they inspire. The market for social products became incredibly concentrated; Facebook and Google built a duopoly in digital advertising; and their vast size and unpredictable effects helped to trigger a global backlash against American tech giants.
If, like me, you think this is all a problem, you could argue for one of two basic approaches to fixing 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 acquire smaller companies or put up new barriers to entering the market or competing on fair terms. The second is to do basically nothing, trusting that the entropic nature of the universe and the inexorable march of time would eventually restore competition.
If the second choice sounds ridiculous, it is not without precedent. In the late 1990s, Microsoft’s dominance over 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 bundling would grant Microsoft total power over the consumer PC market forever. In reality, of course, mobile phones were out there just waiting to be perfected, and then Apple came along and did just that, and now no one really worries too much about Microsoft’s power over the PC market.
I do wish the US government had intervened around 2016 to explore new regulations for tech giants’ mergers and acquisitions. In its absence, we could only bet on entropy — and whichever contrarian capitalists still felt like they could challenge Facebook in the market despite its many advantages.
The thing is, though, that a bunch of contrarian capitalists did. And lately they have been having a lot of success.
II. How competition began
Facebook’s biggest competitor in 2021 is, of course, TikTok, which has been siphoning usage from Facebook’s family of apps since it launched in the United States in 2018 (after merging with Musical.ly).
TikTok began by making it dramatically easier for people to make compelling videos, parceled out fame and fortune with a central feed that is incredibly compelling even if you don’t know or follow a single person, and eventually created an entire universe of audio memes, visual effects, and community in-jokes.
Eugene Wei, our best writer and thinker on TikTok, published the third part of his essay series on the app Sunday night. Among the many salient points Wei makes is that the sheer number of forces that have gone into TikTok’s success have made it difficult for Facebook (or YouTube) to clone. He writes:
People will litigate Instagram copying Snapchat's Stories feature until the end of time, but the fact is that format wasn't ever going to be some defensible moat. Ephemerality is a clever new dimension on which to vary social media, but it's easily copiable.
This is why TikTok's network effects of creativity matter. To clone TikTok, you can't just copy any single feature. It's all of that, and not just the features, but how users deploy them and how the resultant videos interact with each other on the FYP feed. It's replicating all the feedback loops that are built into TikTok's ecosystem, all of which are interconnected. Maybe you can copy some of the atoms, but the magic lives at the molecular level.
The success of TikTok is a source of real anxiety inside Facebook, where employees ask CEO Mark Zuckerberg a question about it during nearly every all-hands Q&A session. The company has deployed a competitor, called Reels, inside of Instagram, and perhaps it will find a way to succeed. But the larger point is that, whatever the odds, Facebook now has to compete against TiKTok, or risk losing the next generation.
You’ve probably already considered that, though. (Unless you’re the FTC, which conspicuously avoided any mention on TikTok in its entire complaint about Facebook’s alleged monopoly position.) But when it comes to mobile short-form video, Facebook and YouTube face a real challenge.
So where else does Facebook suddenly find itself forced to compete?
For starters, there’s audio. While still available only by invitation, Clubhouse recently hit an estimated 10 million downloads. Celebrities including Tiffany Haddish, Elon Musk, Joe Rogan, and Zuckerberg himself have made appearances on the app, granting it a cultural cachet rare in a social startup that is still less than a year old. Clubhouse raised money last month at a valuation of $1 billion — more than Facebook paid ultimately paid for Instagram.
Because it’s an audio app, Clubhouse doesn’t pose quite the existential threat that TikTok does: you can still theoretically browse Instagram or message businesses on WhatsApp while listening to a Clubhouse chat. But Facebook has been sufficiently intrigued by Clubhouse’s rapid rise that it is now working out how to clone the app, according to a report this month in the New York Times. Elsewhere, Twitter already has a Clubhouse clone, called Spaces, in beta. It’s not clear that Clubhouse poses a threat to either company, exactly. But both are still taking it as a challenge.
After years of making its most prominent investments in technically challenging media involving video, augmented reality, and virtual reality, Facebook is reportedly taking a second look at text. The rise of Substack over the past year has begun to mint a growing number of millionaire, text-based creators, while also pulling millions of people away from their social feeds into the relative calm of the email inbox. (I have a personal stake in this one, of course; I started a newsletter in large part because my social feeds had come to feel like a lousy place to get my news.)
What’s interesting here is that Facebook now seems open to this possibility, too. Last month the Times also reported that Facebook is developing newsletter tools for reporters and writers. (I’ve confirmed this with my own sources.) As with Clubhouse, newsletters hardly pose an existential threat to Facebook. But they do bleed time and attention away from the company’s apps — and in a world where news may not be even available on Facebook in some countries, it may be wise for it to have a hedge. (And Twitter clearly thinks so, too: it acquired Substack competitor Revue last month.)
That leaves Facebook competing with legitimately fast-growing, well funded competitors across audio, video, and text. And while it’s in a much earlier stage, I think the company may soon have an interesting competitor in photography as well.
Dispo is an invite-only social photo app with a twist: you can’t see any photos you take with the app until 24 hours after you take them. (The app sends you a push notification to open them every day at 9AM local time: among other things, a nice hack to boost daily usage.) Founded by David Dobrik, one of the world’s most popular YouTubers, Dispo has been around as a basic utility for a year. But last month a beta version with social features including shared photo “rolls” launched on iOS, and quickly hit the 10,000-person cap on Apple’s TestFlight software. It raised $4 million in seed funding in October, and assuming the buzz continues into a public launch, I wouldn’t be surprised if Dispo took off in a major way.
Audio, video, photos, and text: to some extent, Facebook has never had to stop competing across these dimensions in the company’s history. But I can’t remember the last time it was fighting so many interesting battles at the same time.
III. What it means
Here’s what I’m not saying when I argue that social networks are competitive again.
That Facebook has not acted in various anti-competitive ways throughout its history.
That Facebook should no longer be subject to antitrust scrutiny, or that the US government (and, separately, a coalition of US attorneys general) should abandon their lawsuits.
That, given all this new competition, Facebook should be allowed to purchase rival social networks in the future.
That Facebook won’t remain the world’s largest social network for a long time to come, or that its business will suffer in the short term.
In fact, I think there’s a good case to be made that antitrust pressure from the US government in particular is what has allowed competition to return to social networks in the first place. Had Clubhouse or Substack emerged in 2013 or 2014, it’s not hard to imagine Facebook racing to acquire them and knock them off the chessboard. But in 2021, when Facebook faces a formal antitrust review in the United Kingdom over its acquisition of a failing GIF search engine, the company can only sit back and try to copy what others are doing better.
If that’s the case, it suggests that the half-assed response to Facebook’s growing dominance over the past half-decade nonetheless got us, however belatedly, to a better place. Antitrust pressure made it extremely difficult for the company to make acquisitions, opening a window just big enough for new entrants to climb through. It remains to be seen how big any new challengers to Facebook, YouTube, or Twitter can grow. But for the first time in a long time, I’m optimistic about their chances.
Today in news that could affect public perception of the big tech companies.
⬆️ Trending up: Facebook removed the main page of the Myanmar military after a coup in the country. Given Facebook’s role in an earlier military-backed genocide there, the move feels appropriate when weighed against the potential risks. (Reuters)
⬆️ Trending up: Facebook, Twitter, and other big companies pledged that 25 percent of their leadership will be women and underrepresented minorities by 2025. A welcome and overdue step. (Levi Sumagaysay / MarketWatch
🔃 Trending sideways: Facebook’s political ad ban has inadvertently prevented people from buying pro-vaccination ads. At least 110 groups had pro-vaccine ads rejected, a sign of how ineffective AI-based systems remain for this sort of thing. (Darius Tahir / Politico)
⬇️ Trending down: Microsoft joined a cynical effort with publishers in the European Union to bring Australia-style shakedowns to Facebook and Google in Europe. As Gabe Rivera put it, the move would “destroy the basic internet freedom to link, further tilt the playing field against smaller publishers, smother future startup business models in the crib, and make Rupert Murdoch more powerful, all to inconvenience Google a bit.” (Kelvin Chan / AP)
⭐ A review of recent work from academics finds growing pessimism about the coexistence of social networks and democracy. In reading and emailing with researchers, Thomas B. Edsall finds a disturbing picture. He writes about it in the New York Times, and the wide range of perspectives is worth reading:
Asked what the long-range prospects are, Persily said there was no definitive answer. He worries “that the lack of trust in the democratic process, that festered over the last four years and exploded on Jan. 6, will have a severe and long-lasting impact.”
For one thing, purveyors of misinformation and disinformation have become increasingly sophisticated.
⭐ A fascinating account about building ByteDance’s censorship systems from a pseudonymous former employee. “The truth is, political speech comprised a tiny fraction of deleted content. Chinese netizens are fluent in self-censorship and know what not to say. … But political speech still looms large.” (Protocol)
State-level privacy laws are proliferating, threatening to splinter the internet even within the United States. Virginia, New York, Minnesota, Oklahoma and Florida are all considering new privacy laws; progress on a national privacy law remains elusive. (David Uberti / Wall Street Journal)
Google will finally lift its ban on political ads in the United States on Wednesday. I think Google got the timing on this one … basically right? (Sara Fischer / Axios)
⭐ A look at the growing (and appropriate) internal pressure inside Facebook to separate its content policy team from its lobbying apparatus. “You don’t want platform policy people reporting to someone who’s in charge of keeping people in government happy,” ex-Facebook security chief Alex Stamos says here. “Joel [Kaplan] comes from the Bush White House, and government relations does not have a neutral position on speech requests.” (Ryan Mac and Craig Silverman / BuzzFeed)
The New York Department of Financial Services criticized Facebook for not doing more to prevent the collection of unauthorized data about people’s medical conditions. The move followed a report that health apps including the popular period and pregnancy tracker Flo were sharing data with Facebook.(Jeff Horwitz / Wall Street Journal)
Parler’s founder was briefly banned by Parler. But the ban was reversed after an inquiry from BuzzFeed. (Ryan Mac / BuzzFeed)
“Lateral reading” — the practice of learning about a subject by reading multiple sources — can be a key to helping people avoiding conspiracy-laden rabbit holes. Michael Caufield, a media expert at Washington State University Vancouver, lays out his “SIFT” approach to digital literacy in an interview. (Charlie Warzel / New York Times)
A recent Oxford Internet Institute report alleging rapid growth in the field of disinformation was flawed, this piece argues. Heightened press attention to the problem in recent years reflects growing interest in the subject but not necessarily an explosion in influence operations. (Emma Briant / Wired)
The European Union reached a data-sharing agreement with the United Kingdom. Businesses are breathing a sigh of relief. (Aoife White and Natalia Drozdiak / Bloomberg)
A Malaysian news outlet was found guilty of contempt of court over a comment posted on one of its articles. This is what life can look like without Section 230 protections. (The comment was found to “threaten public confidence in the judiciary,” God forbid.) (Nalini Elumalai / Article 19)
⭐ Margaret Mitchell, the co-lead of Google’s ethical AI team, said she was fired after an investigation into her use of corporate email. Mitchell had reportedly used automated scripts to search her corporate email to find evidence of discrimination against her former co-lead, Timnit Gebru. Ina Fried has the story at Axios:
Google was already under fire for its ouster of Timnit Gebru, the other co-lead of the team. Mitchell has been locked out of the corporate email since last month after what a source says was her effort to search corporate correspondence for evidence to back up Gebru's claim of discrimination and harassment.
The move comes the same day that Google announced internally it had completed its investigation of Gebru's exit, as Axios first reported. The company didn't release the findings of that investigation, but announced a series of policy changes, including tying executive pay companywide to diversity and inclusion efforts.
Alphabet is in talks to bring Google News back to Spain. The company shut the service down in 2014 when the country passed a law that would have forced it to pay a licensing fee for linking to headlines and article snippets. (Emma Pinedo / Reuters)
Spotify is developing a high-fidelity tier to launch later this year. Hi-fi options have long been available on Tidal, and more recently, Amazon Music. (Chris Welch / The Verge)
Related: Spotify is expanding to 80 new markets in the coming days, and introducing a variety of new advertising products and creator tools. (Lucas Shaw / Bloomberg)
LinkedIn is developing a marketplace for freelancers. With 740 million users, it would appear to be poised for success. (Amir Efrati / The Information)
YouTube removed a PewDiePie video that attacked popular kids’ channel Cocomelon. It’s a sign that the platform is taking creator-on-creator harassment more seriously. (Lucas Shaw / Bloomberg)
Is Clubhouse about ‘cult’ rather than community? The model of a “stage” and host-approved guests creates a hierarchy common to cults, this piece from a former Facebook executive argues. (Sam Lessin / The Information)
Twitter explored buying Indian social company ShareChat. Among other things, ShareChat makes Moj, a short-form video app that has thrived since TikTok was banned in the country. (Manish Singh / TechCrunch)
How Koo became India’s Hindu nationalist–approved Twitter alternative. Koo, which is built for local-language speakers in a country with more than 700 dialects, just crossed 3 million users. (Nilesh Christopher / Rest of World)
Those good tweets
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In a separate comment (because Marco Polo deserves its own comment/thread :-), I also would like to point out that GitHub is also a social network, that it has had a lot of evolutions since Microsoft's acquisition in 2018, and that the crucial superpower of GitHub, which is to reduce friction around forking, is also the main novelty of TikTok. It bears a mention that forking in the context of user-generated context has also been used successfully in other niche social networks (https://scratch.mit.edu/).
I think this is an argument to think broadly about social networks, and not just look at the innovations of a small cluster of ad-supported, lowest-common denominator platforms like Facebook, Instagram or Snapchat, which, truthfully, do not represent the best tech has to offer.
Casey, when you talk about "social networks" — do you mean "ad-support social networks"? Are the ad-supported ones, by virtue of the fact that they are built for growth (as a consequence of the ad-based model), the only social networks you are interested in?
If not, I must say I am sad you never mention Marco Polo, not even in this article looking broadly at competitiveness across social networks.
Marco Polo has a socially responsible business model, an amazingly original video-first design with a lot of custom-engineered tech (for instance for the seamless realtime video streaming), and is, as far as I know, one of the only social networks not to use dark or viral design patterns to boost engagement. It deserves to be checked out, and certainly deserves at least a shout out if you're describing the rebirth of competition among social networks: