
The New Copycats: How Facebook Squashes Competition From Startups - petethomas
http://news.morningstar.com/all/dow-jones/us-markets/2017080910924/the-new-copycats-how-facebook-squashes-competition-from-startups.aspx
======
abalone
_> Facebook uses an internal database to track rivals... The database stems
from Facebook's 2013 acquisition of a Tel Aviv-based startup, Onavo, which had
built an app that secures users' privacy by routing their traffic through
private servers. The app gives Facebook an unusually detailed look at what
users collectively do on their phones..._

WTF is this shady-ass sh*t. Way to "secure users' privacy," Facebook.

From the sound of Onavo's App Store reviews they are using deceptive marketing
of the "Your phone is infected, install this now!!" variety. Yet they have a
lot of positive but suspiciously brief reviews balancing them out. So Facebook
bought a company that MITMs unsuspecting users for profit, using scammer
marketing techniques and fake reviews to drive installs, then leverages that
to knife babies. "Don't be too proud," indeed.

I hope there is cause for Apple to remove this app from the App Store (like
deceptive marketing or exploitive practices). Or for a bunch of us good folks
to leave negative reviews. These guys depend on informed people avoiding these
apps and not leaving reviews.

~~~
yellow_postit
This is more detailed data it sounds like but fundamentally how is this
different than obsessively monitoring app Annie for which apps are gaining
traction in your space?

~~~
abalone
Totally different. App Annie does not snoop on users.[1]

[1] [https://stackoverflow.com/questions/20014123/how-does-
appann...](https://stackoverflow.com/questions/20014123/how-does-appannie-com-
get-app-rankings-to-1500)

~~~
greenwalls
App Annie acquired Mobidia [https://techcrunch.com/2015/05/06/app-annie-
acquires-mobile-...](https://techcrunch.com/2015/05/06/app-annie-acquires-
mobile-measurement-service-mobidia/) in 2015 which has an app called "My Data
Manager" that is similar to Onavo Count.

~~~
abalone
Apples and oranges. I stand corrected about them snooping on users, but
Mobidia is more upfront about what they do.[1] Onavo is deceptive, suggesting
that they improve "security" and leveraging scammy marketing to drive
installs.

[1] "Our goal is to provide you with a free, simple service without ads. To
keep our service free, we provide research on market trends to help create
better apps." [https://itunes.apple.com/us/app/my-data-manager-track-
your/i...](https://itunes.apple.com/us/app/my-data-manager-track-
your/id477865384?mt=8)

------
bhouston
Facebook is what Microsoft was in the 1990s. Using its existing market
dominance to crush potential competitors by offering their distinctive
offerings as mere features of its existing popular products.

This did lead to a lot of momentum to the anti-trust proceedings against
Microsoft.

I wonder if that encourages Facebook to not do this so obviously in the
future? Or maybe it isn't at all worried about anti-trust for the near term.

I am sure Google, Amazon and Microsoft continue to do doing this as well, but
it seems that Facebook is doing this most successfully or at least most
prominently with its total destruction of Snap.

I guess it is different in that Google and Facebook both have very effective
means to accurately measure adoption trends of new successful market entrants,
and thus can target these entrants better than ever before with total
destruction.

This is just killer:

> In December, Facebook began its group-video-chat offensive. Its Messenger
> app introduced the feature with the ability to see up to six people in a
> conversation, compared with the eight-person rooms on Houseparty.

> In February, Facebook invited Houseparty users between the ages of 13 and 17
> to come to its offices in Menlo Park, Calif., to participate in a study and
> keep a diary for a week afterward that they would share with Facebook,
> offering as an inducement $275 Amazon gift cards.

~~~
AndrewKemendo
I think people forget that the MSFT v US outcome had very little affect on
Microsoft. They took it to appeals court and won.

 _Microsoft would settle the case with the Department of Justice in November
of 2001 by agreeing to make it easier for Microsoft 's competitors to get
their software more closely integrated with the Windows operating system_

[http://time.com/3553242/microsoft-
monopoly/](http://time.com/3553242/microsoft-monopoly/)

~~~
adventured
In fact it had an extremely large negative impact on Microsoft. To know that,
all you have to do is read / listen to [1] actual interviews from people that
worked there through those days. It was very hard on the company and its
employees.

The culture was forced to change substantially. Their behavior was monitored
by the government for years after. They were no longer able to aggressively
compete without chains on their strongest points of leverage. At a time when
IE had conquered the browser market, they couldn't use that new monopoly point
to attempt to crush Google as one example (which is exactly what they would
have done in the late 1980s or early 1990s). It's the same type of restrictive
blanket that was put on Intel by the US Government in exchange for allowing
them to keep their monopoly.

[1] [https://www.bloomberg.com/news/audio/2017-07-28/rich-
barton-...](https://www.bloomberg.com/news/audio/2017-07-28/rich-barton-talks-
about-his-startup-companies)

~~~
socialentp
It may have been stressful for employees and Gates, but it was a slap on the
wrist when compared to the dominant position the company had managed to
attain. Most of the power they had gained they kept. Yes, they ended some of
the more egregious practices like the per-processor fees, but they ultimately
made it out relatively unscathed.

------
xbmcuser
Facebook has been buying all social networks it feels are a competitive threat
to it. First it bought insta then it bought WhatsApp it tried to buy Snapchat
wasn't successful so copied it in insta. One of the things I read a lot on hn
is how Facebook has killed privacy and people try not to use it etc. But I
personally stopped using Facebook not because of privacy concerns but because
Facebook has been making an open web into a private web. And more and more
stuff that in the past would have been on company websites is available on
Facebook alone and sometimes not accessible without a Facebook account.

~~~
heymijo
What struck me from the article was _how_ facebook knew what social networks
are competitive threats. They're tracking what apps you use on your phone.

"Facebook uses an internal database to track rivals, including young startups
performing unusually well, people familiar with the system say. The database
stems from Facebook’s 2013 acquisition of a Tel Aviv-based startup, Onavo,
which had built an app that secures users’ privacy by routing their traffic
through private servers. The app gives Facebook an unusually detailed look at
what users collectively do on their phones, these people say.

The tool shaped Facebook’s decision to buy WhatsApp and informed its live-
video strategy, they say. Facebook used Onavo to build its early-bird tool
that tips it off to promising services and that helped Facebook home in on
Houseparty"

~~~
willstrafach
To add context: Other companies, such as App Annie, offer free VPN services
(under a different company name) in order to track this type of engagement
data. It appears to be very valuable.

~~~
goatforce5
App Annie's service is "VPN Defender", apparently:

[https://techcrunch.com/2014/10/31/app-annie-fills-the-
void-l...](https://techcrunch.com/2014/10/31/app-annie-fills-the-void-left-by-
facebooks-onavo-acquisition-with-its-new-company-smart-sense/)

------
AndrewKemendo
_While getting acquired can be “a very good win for the founders, that might
be at the expense of a more competitive landscape.”_

I think about this a lot and at the end of the day a founder has to decide if
they care about their own payday or the broader ecosystem/market of
independent products.

If you fall into the latter camp, then assuming you are even successful in the
market, you should prepare to die by your sword. Otherwise, the big 5 just
keep getting bigger with more advocates and authority.

You could argue that joining them will be better in the end because you just
bide your time and leave to start something even bigger, but the reality is
you'll have the same dilemma in the future. So why wait to take a stand and
try to compete?

The real question is if it's even practically possible to compete. Given that
VC are generally too timid to fund anything which could get beaten by the big
ones, there aren't a whole lot of options to growth fund something which
really could compete.

~~~
frgtpsswrdlame
>I think about this a lot and at the end of the day a founder has to decide if
they care about their own payday or the broader ecosystem/market of
independent products.

I think the solution has to be in fixing the system. As long as we're saying
this is a competitive, free market but only so long as the individuals in it
act in the interest of everyone and not just themselves then we're doomed. We
need some wide ranging updates to the antitrust literature.

------
iamleppert
I'm sorry but if your product can be easily copied by Facebook, you don't
really have a product.

There was once a time when video chat was novel, but now since the technology
is "done", there is nothing hard about developing these services from a
technical perspective. Handling scale and various other things with these
products used to be a challenge but now we have the cloud, API's and a mature
ecosystem. The world really doesn't need more of the same kinds of
communication apps, it all just becomes a gimmick and less of a utility.

So, most of these products will be successful based upon other factors -- such
as the cleverness of their marketing, or whether or not they serve a niche
that is lucrative enough and underserved enough on which to build a successful
business, but not large enough to attract the attention of one of the
goliaths.

The one advantage startups have over large corporations like Facebook is their
size and speed at which they can move. Engineers at Facebook, like any large
tech company, are encumbered by substantial process, political forces, and a
reluctance to try new ideas. Your typical startup employee is also far more
motivated than an engineer who just wants to be given their daily JIRA tasks.
To be honest, why does a single app need a team of 500 (frontend) engineers in
the first place? When a tech company gets large, it becomes more about
business than technology, anyways.

So, it doesn't come as much of a shock Facebook is turning to the startup
world to source their ideas and duplicate them, which is why I advise all my
friends to steer clear of any of these "we're a better way to share/video
chat/chat/message/communicate" startups. Only go to one if you have some
burning technical itch. The one exception is if the founders aren't totally
delusional and the company operates more under the impression of just getting
an MVP built, with the idea of shopping it around to be acquired in short
order. And in this case, know exactly how long that's going to take, take no
VC funding, have no delusions of grandeur and as an engineer know exactly what
cut you're going to get when the thing gets sold. I've only seen this work if
the founders know someone at the big company and the thing has all been
basically pre-arranged though.

~~~
xenihn
>I'm sorry but if your product can be easily copied by Facebook, you don't
really have a product.

Most things can be easily copied if you throw enough money and developer hours
at it

~~~
bhouston
> Most things can be easily copied if you throw enough money and developer
> hours at it

I would argue everything can be copied from a technical standpoint (excluding
patent issues.) Marketing and user adoption may or may not be successfully
copied though.

~~~
adrianlmm
For a great example of this, G+, millions wasted in a copy of Facebook that
never worked.

~~~
quadrangle
FWIW, they did pose a competitive threat to Facebook, forcing FB to add
features like choosing which groups of "friends" to show a particular post and
letting people see public posts of people who aren't bidirectionally
connected. If Facebook had refused to adapt at all, G+ might have grown more
significant.

------
jitix
> Houseparty says its growth had been stymied by the app’s crash, which slowed
> its ability to introduce new features and attract new users.

This is why horizontal scalability should be a basic requirement in such a
product. These days there's a blanket statement used throughout the industry
that premature optimization is bad. It is bad if you're developing a website
or a stand alone mobile app. But if you're doing something in communications
field (or data, IoT, etc.) scalability is a must-have.

~~~
Analemma_
I think this is a damned-if-you-do, damned-if-you-don't situation though.
Scalability doesn't come for free, in a small startup it usually costs you
velocity (hence: "Do things that don't scale"), and with Facebook breathing
down their necks that may not be a luxury they could afford.

~~~
jitix
But since video chat is quite commoditized building a scalable system from
ground up would have helped them counter facebook by quickly building features
on top of what they had. The article itself mentions that they had to stop
what they were doing and scale the system.

My main point was that one-size-fits-all methodologies don't suit every
software project. In some cases it makes sense to build the feature first and
then worry about scaling but in some cases like this it doesn't.

------
c0smic
This reminds me how important/relevant it's becoming for people to own their
data, instead of giving it up to companies to profit from and eventually sell.

Big issues I see are the vast majority of people just don't want to think
about it, and there aren't any good systems in place to empower (the majority
of) people to retain their data.

------
neerkumar
When FB bought Whatsapp, Whatsapp was handling 20 billion messages a day and
was the #1 app on the phone pretty much anywhere in the world, except for US,
China, and Australia (it still is). Not that they needed some tool to find
that out.

FB did an amazing job in keeping their acquisitions fairly independent and let
them keep grow. That's something really hard to do and they deserve credit for
that.

It is easy to buy the #1 messaging app in the world, if you have the money. It
is hard to make sure those people still stay motivated after the acquisition.

~~~
bitL
WhatsApp's secret was that they struck deals with many operators world-wide to
provide their messaging for free instead of counting it as Internet usage
(look at Brazil for example). Not sure how did they achieve it but that for
sure propelled them to #1 in many countries.

~~~
mi100hael
Considering how text messages and smartphone data usage have become far more
popular than telephone calls, transmitting those messages via HTTP alongside
other data traffic is probably cheaper than building out & maintaining a bunch
of extra SMS infrastructure to handle the load.

[https://en.wikipedia.org/wiki/Short_Message_service_center](https://en.wikipedia.org/wiki/Short_Message_service_center)

------
cft
It is very difficult to make a significant social app these days, mostly due
to Facebook's collection of apps. Almost impossible.

~~~
prostoalex
As opposed to what? A game, a music app, an education app, a commerce app? The
mobile apps are a mature ecosystem in a fairly saturated market, the days of
Yo and others reaching the tops of the app stores are long behind.

------
SKYRHO_
"Facebook uses an internal database to track rivals... The database stems from
Facebook's 2013 acquisition of a Tel Aviv-based startup, Onavo, which had
built an app that secures users' privacy by routing their traffic through
private servers. The app gives Facebook an unusually detailed look at what
users collectively do on their phones..." \- More Privacy Concerns

Wait!.. you mean an app(like facebook) where users voluntarily enter the
intimate details of their personal lives doesn't respect their privacy? Sorry
for the bias folks, but facebook users typically don't respect even their own
privacy.

~~~
Kequc
Facebook unapologetically breezed through every privacy scandal I can even
imagine. It will be remembered as a prolific piece of Pop culture, just by
virtue that few enough people stopped using it.

------
quocble
How ironic, FB uses its data to squash competitors from an app Onavo (a
company FB bought) that promotes itself to protect its user's privacy.

------
shmerl
I'm glad I'm not using Facebook.

------
subsubsub
Putting to one side the slightly shady way in which Facebook found out about
this new start-up for a second, I have a question.

There are examples of companies that made a success of focusing-in on one
aspect of a larger successful company (e.g. the companies that split out the
functionality of craigslist).

But, this feels like an example of what happens when you mistake a Feature for
a Business.

How do you distinguish between the two cases?

------
jgalt212
Neat hack: trick Onavo into thinking your app is more popular or more highly
used than it actually is.

------
deftturtle
Mark, if you're reading this, I want to fight you live on FB video.

------
noncoml
New? Isn't that what MS used to do in the 90s?

~~~
sds2
They changed their strategy?

------
minademian
Commend Houseparty for their resilience. Can't be easy while the cat is
staring you down, planning your demise.

------
grdvnkootcvj
so the question is: how does a new social app compete against facebook? how do
you beat them in the end?

~~~
nanomonkey
You could have a decentralized social app, like secure scuttlebutt.

------
ValentineC
For anyone stuck in front of a paywall:
[http://archive.is/LUAA8](http://archive.is/LUAA8)

~~~
madsbuch
Yep, it would be nice if HN restricted pay walled articles...

~~~
briandear
Or the Atlantic. Apparently they restrict access if you are in Firefox private
mode or if you block tracking. I get it they need to sell ads to survive, but
me seeing an ad is much different that me giving permission to track or load
third party JavaScript.

------
dvfjsdhgfv
Non-paywalled link: [http://news.morningstar.com/all/dow-jones/us-
markets/2017080...](http://news.morningstar.com/all/dow-jones/us-
markets/2017080910924/the-new-copycats-how-facebook-squashes-competition-from-
startups.aspx)

~~~
dang
Thanks. Changed from [https://www.wsj.com/articles/the-new-copycats-how-
facebook-s...](https://www.wsj.com/articles/the-new-copycats-how-facebook-
squashes-competition-from-startups-1502293444).

------
mankash666
It's fairly trivial to get a list of potential competitive threats:

1> New apps with user base in the millions and monthly growth rate in double
digit % 2> Significant VC/angel funding 3> Positive press coverage.

This data collection doesn't require violating anyone's privacy and can even
be outsourced to a third party on a monthly basis for a trivial cost.

So, why are there accusations about monopolistic behavior? MSFT was trying to
block competition via illegal means, like incentivizing partners to use MSFT
products, or going after the competition with expensive (bogus) patent claims,
but FB is doing none of that.

