Facebook (FB) is once again looking to take on the fast-growing SnapChat, according to a report in the Financial Times. The social-networking giant is working on a new app, called Slingshot, that will allow users to send messages that quickly disappear. But can a Facebook SnapChat work this time around?
First of all, winning against SnapChat could be critically important for Facebook stock. The fact is that more people are getting concerned about having their digital life available to everyone. It can mean embarrassment, perhaps even losing a job or a spouse! But at the same time, people still want to communicate will their friends.
This aversion to a fully-open digital life is even resulting in some interesting legal actions. Just look at a ruling in Europe, in which users are allowed to force Google (GOOG) to taken down personal content. It’s known as “the right to be forgotten.”
No doubt, this is scary for Facebook stock. The European decision goes directly against Facebook’s mission of “to give people the power to share and make the world more open and connected.”
Already there are a variety of interesting tech startups that are tapping into the new zeitgeist, such as Whisper and Secret. These apps allow for the sharing of anonymous messages and have been getting lots of traction. In fact, Whisper recently raised $36 million in venture funding from Tencent (TCHEY), Thrive Capital, and Shasta Ventures.
So a Facebook SnapChat does seem like a must-win situation. The new app has been under development for the past few months and Zuckerberg is the lead on the project. The focus is on making it easy to send short video message — that is, a user will push on a screen to make a video. Then, he or she can tap a user profile to send it.
Of course, a Facebook SnapChat would have the benefit of a massive engineering team that knows how to scale an app across more than 1 billion users. But the $19 billion acquisition of WhatsApp may also be a boost. After all, the app is the fastest growing in the messaging space, with more than 500 million users.
Despite all this, a Facebook SnapChat alternative will face some tough challenges. Keep in mind that Facebook tried to enter the market a year ago with its Poke app. Unfortunately, it proved to be a complete disaster.
History has shown that it can be extremely difficult to unseat web companies that already has a big lead in a category. Some examples include Twitter (TWTR), LinkedIn (LNKD) and Yelp (YELP). They have all benefited from “network effects,” which means that the platforms get more “sticky” as the user base increases. Why leave if your friends are there and you have invested so much time there?
Besides, Facebook has had a dry spell with new products. For example, its Home app has gone nowhere, and Graph Search has seen little progress as well. Given this, it makes sense that Zuckerberg’s strategy has been to purchase rivals, such as Instagram and WhatsApp. Of course, he tried to do the same with SnapChat. But his $3 billion offer was deemed to be too low.
With SnapChat’s sizable head start, it will be pretty tough for Facebook to get any headway. After all, other top messaging apps, such as WeChat, Line, Tango and KakaoTalk are also big threats. Even Yahoo! (YHOO) has jumped into the game with its purchase of Blink, which is similar to SnapChat.
But Facebook really has no choice but to try again with another app. For the most part, it looks like the trend towards more privacy is real and could pose a long-term threat to Facebook stock.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.