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Why Snap’s TikTok Copy Can’t “Win the Technochasm”

The video-sharing social media app TikTok has generated a lot of heat over the past few months.

Advertiser Appeal and Innovations Will Continue to Lift Snap Stock

Source: Shutterstock

Though that’s probably not what TikTok’s marketing team meant when they dubbed it the “last sunny corner on the internet.”

First came TikTok’s seemingly endless feed of short videos of happy teens dancing and lip-syncing, which led to its exploding popularity — and a whole lot of media coverage about “what it all means.”

Soon thereafter, however, came national security concerns over TikTok’s Chinese ownership.

“[TikTok] automatically captures vast swaths of information from its users … potentially allowing China to track the locations of federal employees … conduct corporate espionage” or even “blackmail” its users, the Trump administration has charged. President-elect Joe Biden also has called TikTok “a matter of genuine concern.”

Then came threats of a federal ban of TikTok on U.S. app stores — and takeover talks, with Microsoft Corp. (NASDAQ:MSFT) and other heavy hitters emerging as potential buyers, in order to avoid such a ban.

Now we’re at the next logical phase in any popular app’s lifecycle: the launch of competitors from established companies.

In this case, Snap Inc. (NYSE:SNAP) is launching the TikTok-like “Spotlight.” The Verge reports:

Snap is finally ready to compete with TikTok and will pay creators to post on the platform. The company is officially announcing a new section of Snapchat today called Spotlight that’ll surface vertical video content from users that’s more meme-like and jokey instead of the day-in-the-life content Snap previously encouraged. Imagine, basically, TikTok but in Snapchat.

Eventually, a company was going to try to compete with TikTok, and after the announcement on Monday, Snap stock opened 6% higher — though that enthusiasm faded over the course of the day.

It’s not surprising that someone copied TikTok. Over the past few years, we’ve seen a new trend emerge. One tech company will release a new app that distributes content in a novel way, and then other tech companies will run to copy it.

But it was surprising that investors were so eager to buy Snap after the announcement. Some of them might believe they’re getting in on the ground floor of a popular new social media trend. They might even think they’re setting themselves up to profit from the growth of tech – that they’re getting themselves on the right side of the “Technochasm.”

But they’re probably wrong.

In today’s report, let’s take a closer look at Snap’s answer to TikTok … and why there may be much better — and more profitable — ways to play the Technochasm …

Copycats Under Fire

Back in 2011, Evan Spiegel and his partners, all former Stanford University students, created Snapchat, a new app that let people share images with their friends. The twist/innovation was that those images disappeared after 24 hours.

Snapchat also promoted a feature that lets users string together images to make a “story.” The app was a huge hit, particularly with teenagers.

It was such a huge hit that Facebook Inc. (NASDAQ:FB) copied it on its flagship social media app and on Instagram. Both apps now have “stories” features. From an outsider’s perspective, it seems like a cut-and-dry copycat case.

Remember all the antitrust action against Facebook and other Big Tech companies that we’ve discussed here? It’s practices like these that Congress dislikes.

In one congressional hearing, U.S. Rep. Pramila Jayapal (D-WA) asked: “Mr. Zuckerberg, in March of 2012, you suggested by email to your management team that moving faster and copying other apps could quote, ‘prevent our competitors from getting footholds.’”

Sheryl Sandberg, Facebook’s product management director, responded: “It is better to do more and move faster, especially if that means you don’t have competitors build products that take some of our users.” She then added, “I would love to be far more aggressive and nimble in copying competitors.”

Rep. Jayapal: “Has Facebook ever taken steps to prevent competitors from getting footholds by copying competitors?”

Zuckerberg dodged the question, even disagreeing with its premise. Jayapal even asked the Facebook CEO if he directly told Spiegel, Snap’s CEO, that he would clone its product. Again, Zuckerberg dodged the question.

Rep. Jayapal closed her questioning with a short statement:

Facebook is a case study, in my opinion, in monopoly power because your company harvests and monetizes our data, and then your company uses that data to spy on competitors and to copy, acquire, and kill rivals. You’ve used Facebook’s power to threaten smaller competitors and to ensure that you always get your way. These tactics reinforce Facebook’s dominance, which you then use in increasingly destructive ways. So Facebook’s very model makes it impossible for new companies to flourish separately.

Clearly, many members of Congress are giving the side-eye to Silicon Valley’s copy-and-paste practices. Even so, Snap has decided to embrace it, copying TikTok’s endless feed of videos.

Whether this is right or wrong is of no concern to me. I don’t have the power to change it, and I’m not here to regulate business practices. That said, I am here to tell you how to make money, and if the U.S. government is scrutinizing your business practices, that normally makes investors frightful.

Now, Snap’s copying of TikTok is different from Facebook’s Snap facsimile.

For starters, Snap is much smaller than Facebook. Snap has a market cap of around $65 billion, while Facebook is a $783 billion market-cap behemoth.

There weren’t international security concerns over Snapchat. There are concerns about TikTok.

But there’s another reason why Snap’s attempt to take market share away from TikTok isn’t the investment the company needs to “win the Technochasm”

Innovations Will Win the Technochasm … Not Copies

The problem with Snap’s new Spotlight feature is that it isn’t an innovation. It’s one company’s attempt at repackaging the features of another company.

Yes, the tactic proved successful for Facebook, but Facebook is a “Goliath” pushing smaller companies around. Snap, on the other hand, is a relative “David.”

To me, Snap looks like a company struggling to keep up.

So, rather than betting on a copycat, I suggest taking a look at the technology that will enable more people to share more content … the tech that will make apps like TikTok and Spotlight even bigger and better.

I’m talking about 5G, the new technology that will enable all sorts of innovations, including:

  • Autonomous vehicles.
  • Healthcare technologies like telemedicine and remote robotic surgeries.
  • “Smart factories” that integrate machine-learning processes with human oversight — i.e., “cobotics.”
  • Internet of Things (IoT) — a vibrant, high-speed network of physical objects … things … that are embedded with sensors, software, and other technologies for the purpose of exchanging data and “communicating with” other devices, systems and/or people.

5G technology makes these things possible by increasing the amount of data our 4G networks deliver from 100 megabits per second to 10,000 megabits per second — or 100 times faster than the current speed!

According to research from Nokia Bell Labs, more than 70% of the world’s companies will invest in 5G technology over the next five years.

That research also revealed that one-third of companies across all regions fear being outpaced by their competition, should they not invest in 5G within the next three years.

5G is a technology that measures its wealth-creation possibilities in trillions — not billions — of dollars.

That’s a lot of money to capture, and it is far more than Snap stands to rake in from online ad revenue.

So rather than waste time tracking how Snap fares in its new war with TikTok, learn about the companies building the infrastructure that will allow these battles for tech supremacy to take place.

Several such 5G companies are among the small group of stocks that Louis Navellier and I recently discussed for The Technochasm Summit.

During that live event, Louis and I revealed why this small group of stocks could soon become our biggest winners ever.

To learn the name and ticker symbol to one of these stocks with 1,000% potential — a 5G play, in fact — go here to watch the replay.

On the date of publication, Eric Fry did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends … before they take off. And when it comes to bear markets, you’ll want to have his “blueprint” in hand before stocks go south.

Article printed from InvestorPlace Media, https://investorplace.com/2020/11/why-snaps-tiktok-copy-cant-win-the-technochasm/.

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