TikTok, Facebook’s worst nightmare

More than a year has passed since Facebook launched its Tik Tok-like platform Lasso, with mild success. CNBC reported that during its first three months of existence—from November 2018 to January 2019,—the short-video sharing app was downloaded from the Apple App Store and Google Play by 70,000 users in the United States. The numbers sound good; until you compare them with those of its only and main competitor: Tik Tok was downloaded by 39.6 million US users in that same period. For the first time, it seems Facebook cannot copy and wait, using an enveloping strategy. With Tik Tok, the tech giant will either have to buy the company or accept there's a new social media king for younger audiences. Tik Tok proves one thing—Facebook's influence is waning.

Since its inception, Facebook was created as some kind of natural monopoly—and it is trying to make sure it stays that way. The Menlo Park-based service helps connect its users to friends, family, and acquaintances. It works and is able to keep its monopoly because communities of people choose to be registered and active on the platform. While with emails, you can send an email from a Hotmail account to a Gmail user without any complication, it's not possible to talk from Twitter to a Facebook user. Facebook has the advantage of controlling the network, which proves detrimental for users who want to connect to those networks through other platforms. Network effects also shield the tech giant from competitors. Newcomers must have a robust network to succeed, as they cannot access the already existing Facebook community. The tech giant's success depends on the existence of the network, and the insularity of that network ensures its monopoly.

However, Facebook has also worked consistently to make sure it remains a monopoly. In 2012, the company acquired Instagram—a growing competitor—for $1 billion. By that time, Instagram had become the go-to mobile app for millennials and younger audiences (now in their late 20s, then in their early 20s). Facebook was still seen as a computer-dominant platform, not yet so mobile as Instagram, but with the purchase, Mark Zuckerberg addressed that shortcoming. Two years later, the company bought the messaging app WhatsApp for $19 billion. WhatsApp, mostly unknown in the US, was becoming the most popular messaging app in Latin America, India, and Spain. Up till now, Facebook has not made money from WhatsApp, but that's about to change once the company starts inserting ads (readAdvertisers are coming to your favorite messaging app: WhatsApp). In any case, making money was probably not the prime reason to buy WhatsApp; most likely it was to prevent Google from capturing it and building a social network from it, WeChat style.

And what to say about Facebook's foray with Snapchat? Zuckerberg tried to buy Snapchat in 2013 without success. But if he couldn't buy it, then he would copy it. In 2016, Instagram copied Snapchat's Stories feature and started letting users post pictures that would disappear after 24 hours. Later, Zuckerberg implemented that same feature on its other services—Facebook, WhatsApp, and Messenger. The results, as reported byBilly Gallagher for Wired, were immediate: two months after the launch, Instagram stories had 100 million daily active subscribers. By June 2017, that number had increased to 250 million, with Snapchat having only 166 million active users.

Now it's Tik Tok's turn. The 15-to-60-second video app has over 1.5 billion users worldwide and offers feel-good, entertaining content (readTik Tok, the video app that's defining our zeitgeist). Chinese giant ByteDance owns the app since 2017, when it was merged with the Chinese lip-syncing app Musical.ly, creating the Tik Tok we know today. Facebook had also made attempts to buy the platform. In late 2016, Zuckerberg tried to buy Musical.ly to break into the Chinese market, but negotiations were not successful. Four years later, Tik Tok is everywhere, especially among young audiences. According to eMarketer, 22% of US millennials and Gen Z (13-38) use Tik Tok, with 42% of US teenagers between the ages of 13 and 16 using it.

Tik Tok is different from other platforms, particularly from Facebook. While social media platforms have mostly depended on "known" networks—a network made up of family, friends, and acquaintances,—Tik Tok is different. On Tik Tok, users can watch any content from almost any user, not just family and friends. And while social media services were mostly geared towards relationships—"keeping in touch"—Tik Tok is made for entertainment. And Facebook does not know how to battle it yet. Lasso, launched in November 2018, was its intent to copy what it cannot buy—similar to Instagram Stories. But in this case, it's not working. 

What can Facebook do? Before the company went public, as reported byWired, Zuckerberg gave a text to its employees, which read: "If we don't create the thing that kills Facebook, someone else will. ‘Embracing change’ isn't enough. It has to be so hardwired into who we are that even talking about it seems redundant. The internet is not a friendly place. Things that don't stay relevant don't even get the luxury of leaving ruins. They disappear." Facebook must keep moving, or a newcomer like Tik Tok will replace it. 

With Lasso's failure, Facebook could either try and implement the same feature on Instagram—an already popular platform,—try to buy the company from ByteDance, or accept that its own dominance is waning. The network effects that Facebook so dearly protected do not really matter when another company creates its own—now all kids are on Tik Tok, not Facebook. They mattered when other companies lacked the resources to develop their community, but Tik Tok is replacing Facebook among Gen Z users. 

Still, the Menlo Park-giant is looking after its network-based monopoly. In 2019, Zuckerberg announced a redesign of the platform, which would include dating features, full encryption, and, most importantly, it would let users communicate from Messenger to WhatsApp to Instagram. This last initiative would bind the three platforms closer together and extend Facebook's life. Although teenagers may not have Facebook, she/he does have Instagram, and he will be able to connect with someone on the Facebook app. 

As 2020 moves forward, we can say this will be a tough year for Facebook. The tech giant will have to fend off fashionable newcomers as Tik Tok and figure out how to offer better privacy settings to its users. But what seems to be clear is that Facebook's unique dominance over the social media space has weakened. There's space for newcomers if they find a niche.

Carmen Arroyo & Josep Valor

Published in Media Matters, a blog by IESE Business School