Why Snapchat is Losing To Facebook 7 Steps to Turn Your Huge Competitor's Advantages Into Crippling Vulnerabilities

“You come at the king, you best not miss.” – Omar Little

In the summer of 2016, Facebook finally figured out how to suck the wind out of Snapchat’s sails.

The successful attack–in which Facebook copied one of Snapchat’s core features and pasted it at the top of Instagram–came 3 years after Snap rejected a $3 billion acquisition offer and at least four failed attempts at clones and other vague knockoffs.

The effectiveness of Facebook’s new competitive strategy took everyone (apparently including Snap’s CEO) completely by surprise, and the damage came swiftly: within months, Snap’s user growth rate, which had previously been worthy of the label “meteoric,” fell off a cliff.

Smelling its first battlefield victory in a war it had been losing badly, Facebook wasted no time, pasting Snapchat’s “Stories” feature across every one of its core apps: Messenger, WhatsApp, and Facebook Mobile, itself.

At Facebook’s developer conference (F8) just under a year later, Mark Zuckerberg got on stage and took a long, proud metaphorical sip of Snapchat’s blood from a metaphorical crystal goblet before proceeding to explain Facebook’s plan to rebuild the digital social experience around cameras.

The vision, of course, was not Zuckerberg’s, but Spiegel’s, but Zuckerberg The Competitor had no time for silly whiny distractions about who had which idea first. As he said on Facebook’s quarterly earnings call for Q1 2017:

But I do think at this point we’re pretty much ahead in terms of the technology that we’re building, and making an open platform I think is a big step forward. A lot of people are using these products across our family of apps. And I would expect us to continue leading the way forward on this from this point on.

And who among us can fault him? “Great artists steal,” do they not?

Great competitive strategy according to Banksy

Banksy understands competitive strategy

And great artist or no, Zuckerberg appears to be right: By bolting one of Snapchat’s core features onto Instagram, Facebook has finally turned the tide of the war and tipped his biggest menace onto his heels. For the first time, Snap is on the defensive, and has been rapidly losing ground.

Some of the commentariat has already called the match.

And all of us observers must ask ourselves: Is Snap the next Twitter, doomed to become a critical part of some (but not enough) people’s daily lives that struggles to turn a profit?

It sure looks like it might go that route. But, contrary to most of the current conventional wisdom, a reverse of momentum does not have to mean the end of the war.

Quite the contrary: this essay will argue that with a better competitive strategy involving a few bold, deft, and (dare I say) epic moves, Snap could potentially retake the initiative, transform Facebook’s biggest advantages into its biggest weaknesses, and give itself a legitimate shot at the crown.

The key to Snap’s table-turning maneuver is conceptually quite simple, but that does not mean it is easy. Before I share it with you, though, let’s pull back and get a clear view of the landscape.

Facebook Has Been Trying To Eliminate The Threat From Snapchat Since 2012

Facebook’s original competitive strategy against Snapchat involved building a completely new network from scratch and then leveraging the massive advantages in distribution of the newsfeed to promote it.

The first foray of Facebook’s “build new network, add newsfeed” strategy was Poke, a nearly 1:1 clone of Snapchat that Facebook released in December of 2012.

When Poke launched, Facebook’s comms team decided to emphasize the fact that Mark Zuckerberg, himself, wrote and contributed code to the new app. And, of course, links to download Poke were plastered across the top of the newsfeed for a while.

Top-billing in the newsfeed gave Poke a big spike in downloads and a flurry of initial usage. On December 22nd of 2012, the app hit the #1 slot in the US App Store.

But retention and its cousin, word of mouth, were dismal. By December 26th, a mere four days after its debut at the top spot, Poke had declined to #34 on the charts.  The downward slide continued, and never stopped.

With Poke, Facebook got its very own VIP ride on the Buzzy Social App Rollercoaster Of Hell–the sudden surge of explosive growth and excitement followed soon after by a rapid, shockingly steep decline that never smooths out but instead crashes directly into the hard pavement.

The harsh metal taste of near-complete irrelevance is one that many a social app developer has experienced, but Facebook rarely has.

And so, after its first competitive strategy ended in failure, Facebook went with Plan B: “If you can’t beat ’em, buy ’em.”

This strategy worked with Instagram, whose founders Kevin Systrom and Mike Krieger accepted Zuckerberg’s $1,000,000,000 (Tres Commas!) buyout offer just as their app’s already-impressive growth was about to really take off.

It worked with WhatsApp, which built a massive network by offering free IP messaging in European, Latin American, and African countries where telecom carriers charged ridiculous prices for SMS.

Facebook offered $18,000,000,000 and a seat on the board to take down that threat, and Jan Koum happily obliged.

But it did not work with Snapchat and Evan Spiegel, who seems to have turned down Facebook’s $3,000,000,000 without hesitation or second thought.

After Spiegel spurned Zuckerberg, Facebook decided to try its hand again at the “build a new network from scratch and distribute it like crazy” approach.

This time, instead of copying Snapchat outright, Facebook would create and launch new apps with different spins on social messaging, ephemeral sharing, and social video.

Out of Facebook’s original anti-Snapchat competitive strategy came:

  • Slingshot, Facebook’s “novel” take on ephemeral messaging mechanics that came out in a couple months after it killed Poke and then got killed in December of 2015.
  • Rooms, an “anonymous chatroom + group messaging app that harkened back to the good ol’ creepy days of early AOL and got killed the in the same sweep that killed Slingshot.
  • Riff, Facebook’s attempt at a “collaborative video creation and editing” app. This one launched in the Spring of 2015, and also got taken out back and shot with its friends, Slingshot and Rooms that December.

As this timeline of failure suggests, Facebook has considered Snapchat a serious threat for years and has been frantically trying to find a way to counter it.

In a bit, we’ll look at why Facebook was unable to accomplish this for so long, and how it finally succeeded. But first, it’s important to understand why Facebook was so afraid.

Why Facebook’s Fear of Snapchat Was Totally Warranted

First and foremost, Facebook is in the business of selling ads that monetize users’ attention on properties it controls. And it’s gotten pretty good at it, especially on mobile.

Indeed, as the image above indicates, more than 80% the $8.81 billion of the advertising revenue it generated in 2016 came from mobile ads.

Given the nature of Facebook’s business, any product that redirects significant attention and time away from Facebook’s properties (especially on mobile) represents a serious threat.

But the threat from Snapchat was not just about time and attention. It was far more serious than that.

Because while it’s true that growing numbers of young people were spending more time on Snapchat and less on Facebook and Instagram, the potentially mortal threat came from what these young people were doing there: exchanging photos and videos from the moments of their lives.

Understanding the implications of the fact that Snapchat users were sharing many moments of their lives on Snapchat and not on Facebook and Instagram is essential to understanding why Facebook saw Snapchat as a major threat.

Facebook knows damn well that its effectiveness at monetizing attention and increasing the time users spend its properties depends on privileged access to a unique, compelling, and ever-growing dataset it controls.

More concretely, the keystone of Facebook’s entire advantage is the fact that people rely on it to communicate with people they know and use it to exchange personal information with their friends and loved ones.

Everything else–its position as a leading distributor of news, articles, and targeted display ads–is almost entirely contingent on people using Facebook to share their personal moments with each other

Without exclusive access to a rich and growing database of people’s personal photos and videos (of weddings, parties, vacations, and babies), of the places they go and the events they attend, Facebook is just a over-engineered news reading app.

And being an over-engineered media aggregator is not a source of long term advantage or sustainable profits.

But even though Facebook understood that Snapchat represented a potentially mortal threat as far back as 2012, it did not seem to grasp why this threat existed or what it might do about it for many more years.

The problem seems that have been that Facebook did not fundamentally understand the essence of successful competitive strategy, which leads us perfectly to the next heading:

The Essence Of Successful Competitive Strategy, Distilled Into 7 Simple Steps

The essence of competitive strategy is actually fairly simple.

  1. Identify the threat.
  2. Determine the true nature of the threat and the structural forces that created it and allow it to persist.
  3. Identify the unique advantages at your disposal.
  4. Establish how best to use those advantages to counter the threat.
  5. Focus the majority of your resources on leveraging those advantages.
  6. Push and push and push until the threat loses its balance. 
  7. The moment the threat is tipped back on its heels, maximize your strength of force to knock it down and, if possible, destroy it at the root.

In its ongoing conflict with Snap, Facebook clearly has had steps #1 and #3 dialed-in for a while.

As its many efforts to build competitive apps demonstrates, Facebook clearly understood that Snap posed real risks to its core business.

Its attempt to use the newsfeed to promote Poke suggests it understood that the massive reach and addictive powers of the newsfeed gave it a large and unique advantage in distribution.

But to develop a winning competitive strategy, identifying the threat and understanding your unique core strengths are insufficient by themselves. You must also understand WHY the threat became a threat and HOW to leverage your unique core strengths against it.

Between 2012 and the summer of 2016, it seems that Facebook did not really understand why Snapchat became a threat or how to use its own unique advantages to counter it.

Let’s explore:

Why Snapchat Was Able To Undermine Facebook’s Position In The First Place

If you are a young person, know any young people or used to be a young person yourself, you probably know that young people have an profoundly urgent need for self-expression and social interaction.

Facebook and Instagram, which were the two dominant social products when Snapchat showed up, delivered just fine on the social interaction part, but social interaction on FB and Instagram came with huge pressure to make yourself and your life look perfect.

After all, everything you post on Facebook or Instagram is there forever, for everyone–including your real friends, frenemies, parents, grandparents, colleagues, bosses, and potential future bosses–to see and to “like” or comment on…or (worse) to see and not “like” or comment.

But Snapchat offered something radically different: everything you posted there would be ephemeral and fleeting. It featured no public “likes,” comments, or other high-pressure forms of social validation and invalidation.

You could share poorly-shot, silly, embarrassing, and even scandalous pictures and short videos and not have to worry about losing your job or feeling bad about yourself because not enough people gave you the digital thumbs up.

Because of these things, Snapchat offered something that Facebook and Instagram could not: a place young people express themselves on the internet without being nearly as self-conscious about it.

The result?

With a weirdly-designed and unintuitive user experience, Snapchat caught on like wildfire in a drought, growing to 150 million monthly active users, a large percentage of which share multiple times per day.

And far from being the hindrance to growth that many claimed they would be, Snapchat’s arcane user experience and unintuitive design conventions only accelerated its virality.

Josh Elman, the insightful growth mind and current Greylock venture capitalist, named this concept “Shareable Design.” As Elman explains it:

Shareable design understands the deeply social nature of how humans learn, and capitalizes on people’s desires to learn and to teach.

Snapchat does this brilliantly, because each of those seemingly obscure features is an opportunity for its users to show their friends how to do something cool. Showing your friends something cool can increase your social standing, or maybe it just gives you a good feeling. Either way it’s something you want to do!

And for Snapchat, that’s great, because it’s converting you into an evangelist for its product, and you don’t even feel like you’re evangelizing: You’re just showing your friends how to do something neat.

But despite its multiple early missteps and failures, Facebook’s was not standing still. And in the summer of 2016, it finally found the edge that finally allowed it to turn the tide.

From the outside, it’s not clear whether Facebook found this edge simply by throwing stuff against the wall until something finally stuck or whether it arose from a more deeply-considered competitive strategy, but it doesn’t matter that much.

Facebook finally discovered the RIGHT WAY to use its unique core advantages to counter the Snapchat threat.

The Unexpected Vulnerabilities That Let Facebook Siphon The Fuel From Snapchat Rocketship Of Growth.

For four years, Facebook had tried and failed to use its substantial advantages in financial and human resources and its gigantic advantage in distribution to build a network that could compete with Snapchat from scratch.

Even though it took more than four years, Facebook eventually realized that trying to fight Snapchat on Snap’s home turf was a losing strategy.

And in the summer of 2016, Facebook did the smart thing: it realized that its biggest natural advantage was not distribution, but its epic network effects.

After all, at nearly 2 billion monthly active users, Facebook’s network spans over 25% of the entire human population, and just under 66% of the portion of it that has access to the internet.

So instead of trying to create a new network with a brand new app and a bunch of aggressive cross-promotion, Facebook just copied one of Snap’s core features (Stories) and pasted it into Instagram.

Ben Thompson of Stratchery, writing an essay on “Facebook and the cost of monopoly” in his signature incisive style, summed this up quite well:

Instagram’s point of differentiation was not features, but rather its network. By making Instagram Stories identical to Snapchat Stories, Facebook reduced the competition to who had the stronger network, and it worked.

But it also worked because the Stories format is a natural complement to Instagram’s core format.

Before Facebook put Stories into Instagram, Instagram’s central mechanics revolved around rewarding users who posted the most compelling images and videos with the dopamine hits of “likes” and comments.

On the flip side, those same mechanics “punished” users whose likes and comments didn’t attract likes or comments.

To a large part of Instagram’s core audience (especially the teenage and early twenty-something demographic that overlaps most strongly with Snapchat), every post on Instagram was either a source of personal validation (lots of likes and comments) or rejection (no or few likes and comments).

The result was that Instagram became about creating the perfect shot, the perfect filter for that shot, and the appearance of a perfect and enviable life.

Unlike Instagram, Snap’s momentum was not built on digitally-mediated validation, and for its core users, sharing those more informal moments from their lives on Snapchat felt safer.

But when Facebook pasted Snapchat’s Stories feature at the top of Instagram, Instagram killed two birds with one app: the lightweight, goofy, and spontaneous stuff could live in Instagram Stories while you saved the main feed for those heavily curated moments of your faux-perfect life.

If you were in Snapchat’s core demographic, most of your friends already had Instagram accounts and still used them often enough, so switching would be painless. And if you were not already regularly using Snapchat, you now didn’t have a compelling reason to start.

The Stories format, much like the status updates, articles, and pictures we share on Facebook and the videos and images we share on Instagram, are in large part about sharing yourself and your perspective with an audience.

And when it comes to sharing yourself with an audience (vs just your intimate group of friends) Facebook’s massive network (more than 10x Snapchat’s) makes its products inherently better at the job.

Why Snap is highly unlikely to win the war for advertisers

(Source: Share Lab)

Many of the same advantages that give Facebook/Instagram/WhatsApp a huge edge in incentivizing sharing when you want to reach a large audience give it a nearly-unbeatable long-term advantage in the war for ad budgets.

Specifically, Facebook has massive network of nearly 2 billion active users, almost all of them using Facebook with their real names. When you combines that network with:

  • A database of every share, like, reaction, and comment, and tagged location its active users have ever put into the system.
  • The huge reach its “Like” buttons have created across most of the entire web.
  • All of the “offline” consumer behavior data it buys from Datalogix.

You now have most sophisticated and powerful audience targeting capabilities the world has ever known.

Snap seems to be betting that it can find an edge capturing the elusive “brand spend” as it inevitably moves off of traditional television and finds its way online.

But while it may have near-term success capturing the “experimental budgets” that brands allocate to test unproven channels, Snap’s pursuit of brand spending may be a losing bet longer term.

This is because the trends in the brand advertising world are steadily inclining themselves towards performance.

If and when Facebook gets its premium video play figured out, the trend of brands basing their advertising investments on performance is not only bad news for TV networks. It’s bad news for Snap, too.

While Snap’s ad platform does use offline data from companies like Datalogix to help advertisers find their target audiences, its standard targeting options are far, far less sophisticated than Facebooks.

Most of Snapchat’s native targeting options are built around retargeting, fairly basic demographics (age, gender, income, location), and a concept the brand advertising world calls “affinity.”

Snapchat’s retargeting is straightforward and, if it’s like most retargeting, probably pretty effective: if someone visits your website or you have their email address and/or phone number, you can target them later with ads on Snapchat.

The effectiveness of Snap’s relatively limited demographic data and the ways it’s using affinity targeting at this point are a lot murkier. For the uninitiated, Affinity is basically the brand advertising world’s version of “people who watch or read that might also also like this.”

On Television and in print media, brands have longed used a mix of demographics and affinity research to choose which content to run ads against.

Affinity and demographic targeting are why the vast majority of ads in Vogue Magazine are for high-end fashion brands for women, Saturday Cartoons are full of TV ads for Toys ‘R’ Us and Lucky Charms, and daytime soap operas feature ads for home cleaning products and debt consolidation services.

In Snapchat’s version, affinity and demographic targeting lets you create segments like “males over 23 in Los Angeles who have engaged with ESPN’s football content on Snapchat.”

Unlike “offline” affinity targeting, Snapchat’s version ensures you’ll only pay for the people you’re targeting and you’ll know how many of them engaged. But much like on TV and print media, targeting ads based on thin demographic data and “affinity” for certain content is inherently imprecise.

And while I’m open to being proven wrong, precisely-targeted ads matched with messages thoughtfully crafted to resonate with the precise target will tend to significantly outperform imprecisely-targeted ads for most categories of products and services.

Given this, the combination of Facebook’s precision audience targeting, the huge reach of its network, and the branding capabilities offered by video will be extremely hard anyone–traditional TV networks and Snap alike– to beat.

Indeed, while it’s not impossible, it’s quite hard to imagine how Snap will be able to come up with a more compelling value proposition to advertisers that they can back up with measurable results.

How Snap can turn Facebook’s massive advantage against it and create an into unbeatable advantages for itself in a few simple steps

When it comes to satiating our human desires for personal validation and amplifying our egos by getting us in front of an audience, Snapchat’s network of 166 million daily users will always lose to Facebook’s nearly 2 billion.

Any feature that Snap creates that revolves around giving its users an audience and gratifying their egos is inherently vulnerable to cloning by Facebook. And given Facebook’s network advantages, Facebook’s versions will always be better doing that job.

Likewise for advertisers: Snap simply cannot compete with Facebook’s massive reach, it’s micro- and macro-targeting options, and its ability to deliver ROI to advertisers who know what they’re doing.

It would be easy to look at this situation and conclude that the gig is up… that’s Snap should’ve sold to Facebook for $3 billion when Facebook was still afraid, but now it’s too late, and Snap is doomed.

Ah, but not so fast.

Yes, it is likely true that Snap cannot win on ads, on audience, and on the fulfillment of human vanity. And if Snap’s leadership refuses to accept that and continues to try, then it will probably die trying.

But all is not lost.

Before we explore how Snap could design a competitive strategy that will allow it retake the initiative from Facebook and turn back the tide, let’s look again at the 7 distilled steps of successful competitive strategy:

  1. Identify the threat.
  2. Determine the nature of the threat and the structural forces that created it and allow it to persist.
  3. Identify the unique advantages at your disposal.
  4. Establish how best to use those advantages to counter the threat.
  5. Focus the majority of your resources on leveraging those advantages.
  6. Push and push and push until the threat loses its balance. 
  7. The moment the threat is tipped back on its heels, maximize your strength of force to knock it down and, if possible, destroy it at the root.

After Facebook copied and pasted Stories across all of their properties, Snapchat’s growth almost completely stalled, so by now, Snap’s CEO Evan Spiegel and his executive team are clearly aware of the threat.

That takes care of #1. But what about the other 6 steps?

At this point, it seems far from clear that Snap’s leadership fully understands the true nature what has happened to them and why Facebook was able to knock their growth rocketship out of the sky.

More surprisingly, despite Evan Spiegel’s apparently deep intuitive sense for his users’ psychology, it’s not clear he’s been able to use his intuitive sense to articulate an effective competitive strategy in the face of Facebook’s intense momentum.

Because right now, it looks like Snap’s strategy is to respond to Facebook’s assault by charging back at the juggernaut head on. But here’s the thing: when you’re up against a juggernaut, charging it head on will almost always end up with you trampled to death under the juggernaut’s boots.

So don’t charge at the juggernaut! Instead, step swiftly out of its path, set up a tripwire, and lay down a nice pit of spikes for it to fall into when it trips.

In other words, turn the juggernaut’s own nature against it.

In concrete terms, Snap can turn Facebook’s biggest strengths into massive vulnerabilities by positioning itself in direct opposition to everything that makes Facebook strong.

Here are the steps:

  1. Renounce digital advertising and declare that it was respect for its users’ need for a safe, private, safe place to express their personalities that made Snapchat successful in the first place.
  2. Acknowledge that the practices of harvesting its user’s data to help sell their attention to the highest bidder is directly at odds with Snap’s mission to become the best, safest, and most meaningful place to express who you really are online.
  3. Follow through on that promise in a way that it forces Facebook back onto the defensive. Loudly and obviously make a point of offering to show your users every piece of personal data you have on them and allowing them to delete any or all of it with a single tap.
  4. Make and promote Stories and other videos detailing in simple but compelling language everything that Facebook + Instagram knows about its users and the ways they go about knowing it. Promote these videos everywhere, including on YouTube and Facebook
  5. Finally, reposition Snap as a “self-expression” company that respects its users’ humanity…that would never mine their interactions with their friends and the content they share for insights into their emotional states, or tweak its algorithms to see how it could influence their moods or their beliefs about the world.

How Snap could monetize self-expression without advertising

From its new position as THE self-expression company without any advertising and personal data mining, Snap could then build its entire monetization strategy around enabling richer and more meaningful forms of self-expression.

It could start by selling “limited-quantity” lenses to its users as one-off micro-transactions. From there, it could bundle custom lenses into premium packages, or create subscription options for “all-you-can-eat access to premium lenses” or “VIP-only lenses” and throw in other self-expression tools for good measure.

But here’s where it gets truly epic (and truly $$$$): once Snap has built an initial monetization process by cranking out tons of unique custom lenses, it could then release the tools it uses to create those filters to its users.

If it wanted to get really fancy, it could have starter filter-creation tools that are dead-simple and require minimum skills to use, and more advanced tools with a steep learning curve. It could let its most passionate uses make lenses for themselves and share them with their friends.

And it could also let them sell their creations in a marketplace that it controls, taking the customary 30% cut. Of course, DIY lenses would just be the beginning–the proverbial “low-hanging fruit.”

After all, Snap would now be THE digital self-expression company, and people have much more to express about themselves than their faces…even lens-enhanced versions of those faces.

As it digs into the rabbit hole of self-expression, it will find that its users have much more to express than their vanity and their need for validation. They also would like to express their kindness, their vulnerabilities, their anxieties, their fears, their joys, and their sorrows.

And they will want ways to express these things not just as individuals, but as groups. And (though this is just a hypothesis), maybe they’d prefer to do those things without being having them sold to advertisers.

The Conclusion: By all means, come at the King. Just be sure you know how not to miss.

So no, Snap, you cannot beat Facebook at narcissism or at enabling shallow forms of personal validation. And you are unlikely to beat it at delivering brand advertisers the results they increasingly demand.

So don’t even try. Instead, attack your opponent where they cannot fight back without hurting themselves in the process.

Show their addiction-creating slot-machine mechanics and all-consuming personal data maw for what they are: clever and highly effective ways to manipulate human beings the digitizing their identities and distracting themselves from their lives for the benefit of advertisers and Facebook’s bottom line.

Give your users the tools to express their complete selves without mining those selves for every sellable part. Become the change we might all like to see in the world.

Perhaps you may even find you change it for the better.

About Daniel Kaplan

I'm just a dude from New York City in the 80s whose seen some shi** and is now on a mission to apply his strategy and storytelling skills to spread some love in this mother-loving planet.

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