Why Facebook Wants Snapchat But Doesn't Need It
Snapchat could hardly have asked for a better publicity boost than Facebook's $3 billion offer for the photo-messaging company. Within a day after Snapchat refused the overture, the application jumpedfrom sixth place to fourth in the U.S. iOS store. In Russia, where few people had previously heard of Snapchat, it soared from 1,773rd place to 263rd.
Facebook's enormous market power, and Mark Zuckerberg's judgment, clearly command a lot of respect. So why does Facebook have to offer billions to twentysomething start-up founders who make apps it can easily reproduce? Therein lies a clue to the fickle workings of social media.
Last year, Facebook created its own version of Snapchat in a matter of days. The replica, Poke, named after an old Facebook feature, works exactly the same as Snapchat, allowing users to exchange photos and videos that disappear in a few seconds -- perfect for "sexting," but also for recording life's fleeting moments in a philosophically appropriate ephemeral way.
Poke failedmiserably. Almost nobody downloads it anymore. In other areas, too, Facebook's market power hasn't been enough to crush competitors. The service has all the functionality of Instagram, Foursquare and, yes, Twitter, but it has not killed them off. Similarly, Google's social networking service, Google+, has failed to oust Facebook.
The social-networking world -- and, in fact, the world of digital user experiences -- is irrational in that way. There are people who use Apple's iOS operating system and will under no circumstances switch to Android. Carrying an iPhone as opposed to a Samsung is a social statement. There are people who use Facebook and those who won't be caught dead on it. A lot of young people fall into that category.
"I decided to get a Facebook just to see what it was all about," a 13-year-old from New York wrote in a hugely popular poston Mashable last August. "I soon discovered that Facebook is useless without friends. My only friend is, like, my grandma. Teens are followers. That's just what we are. If all my friends are getting this cool new thing called Snapchat, I want it, too! We want what's trending, and if Facebook isn't 'trending,' teens won't care."
Facebook is not "trending" because it is so huge that everybody's parents are on it. There is even a Tumblr blogcalled "Oh Crap. My Parents Joined Facebook." (Tumblr is another platform popular with young people despite having few features not available on Facebook.)
Consequently, whatever Facebook might do under its own brand, it will not get much traction with teens. At the same time, Zuckerberg cannot fail to see where things are going for social networks.
Photo and video sharing on the Internet is growing rapidly. A recent Pew Internet survey showedthat 54 percent of U.S. Internet users authored and posted photos and videos this year, compared to 46 percent last year. Most of the growth comes from young people: 79 percent of users in the 18-to-29-year-old demographic post photos on the web. In that age group, 26 percent use Snapchat.
By contrast, only 5 percent of adults between the ages of 30 and 49 use Snapchat. These are in large part the parents. They are all on Facebook.
Zuckerberg himself is 29, on the threshold between the two age groups. He is not too old to understand the author of the Mashable blog. It may have been his instinct as a geek to try cloning the features first to see if it would work, but he knows the newcomers' brands are more valuable than their code.
That's why Zuckerberg paid $1 billion for Instagram last year and did not interfere with its development as a separate service. He has been in no hurry to monetize it -- ads will appear on Instagram only next year -- and he allowed founder Kevin Systrom to keep running it. The company's user base has grown under Facebook's ownership, recently passing the 150 million mark.
Facebook's approach to Snapchat would have been the same -- hands-off and careful. Zuckerberg would not have rushed to squeeze money out of the service, now devoid of a business model, or to integrate it into Facebook. Social cachet is a fragile commodity.
Still, Snapchat founder Evan Spiegel refused Zuckerberg's offer. After watching Twitter's triumphant initial public offering, he probably recognizes that he might be sorry for the rest of his life if he misses out on a similar high point. Snapchat could be blown away by some new fad, but then Facebook is still there after almost 10 years.
Facebook, for its part, doesn't really need Snapchat to ride the photo and video trend. It already has Instagram, used by 43 percent of Americans in the 18-29 age group. So while Facebook's $3 billion offer may have made sense as a way to remedy the failure of Poke, it could also be money well saved.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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Leonid Bershidsky at email@example.com