Facebook’s Aggressive Moves on Startups Threaten Innovation

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In 2010, Foursquare react-text: 249 cofounder Naveen Selvadurai believed that his company, and several other social-media upstarts—Twitter, Tumblr, Path—could carve out successful niches against Facebook. In response, Selvadurai conceived an “anti-Facebook alliance” of up-and-coming social-media Davids taking on their industry’s Goliath. Selvadurai had informal discussions with friends at Path, Instagram and Twitter, all of which had faced threats of Facebook copying key features.

In 2012, Facebook snapped up Instagram for $1 billion. Path declined in popularity and eventually sold. Selvadurai, who left Foursquare in 2012, cites many reasons for the company’s struggles, from arriving before users were comfortable sharing their locations online to Facebook’s mimickry. “It’s really fun to work” on consumer Internet products, he says. Now, Facebook is facing challenges on many fronts. Privacy activists criticize Facebook’s cooperation with censorious governments.

Since 2012, Facebook has repeatedly copied or acquired social-media apps that gain traction. Facebook attempted to acquire Snap for $3 billion, was turned down, and made at least 10 attempts to copy its most distinctive features.

 In 2013, Facebook  bought Onavo, an Israeli startup that makes an app that lets people monitor how much mobile data they’re using. After Facebook bought Onavo, it used the aggregated data from its millions of users to track which apps are growing in popularity. Onavo data reportedly convinced Facebook it should pursue WhatsApp and copy live video streaming services Periscope and Meerkat.

Facebook isn’t the only Silicon Valley company that competes aggressively against upstarts. When Google Maps competitor Waze became popular, the company bought it. Many observers believe Facebook is bucking Silicon Valley convention, where competition is expected, but “innovation” is sacred. Tech companies have always understood that they might be overtaken by upstart disrupters. Privately investors grumble that they won’t invest in social media companies anymore. Meanwhile some founders see selling out to Facebook—no matter how early—as inevitable. Josh Lee, a former Facebook employee, recently joked on Twitter that someone should start a philanthropic fund that pays founders to turn down Facebook acquisition offers.

Lee, who is now a freelance designer, worries that Facebook’s consolidation of power creates a void of creativity, since every company it acquires becomes indoctrinated in the Facebook way. Facebook still poses a threat to Snap. After Instagram copied its “stories” feature last year, Snap’s user growth slowed significantly.

Such diversity is especially critical as Facebook’s ambitions expand. The company’s namesake app has two billion monthly active users; its subsidiaries WhatsApp, Instagram and Facebook Messenger have a respective 1.3 billion, 800 million and 1.3 billion. Beyond social networking, the company’s products are now pushing deeper into news, video, virtual reality, artificial intelligence, payments, customer service, ecommerce, and drones delivering internet service. There’s little stopping Facebook from using similar tactics in each new market it enters. Startups beware.