Facebook Now Out to Squish Even Newbie Potential Competitors

Nothing like strangling babies in their crib.

Trump should go on vacation more often. The Wall Street Journal has had a raft of good stories this week, one of them on how Facebook has redefined what it considers to be a competitive threat to include much smaller and newer companies than did not all that long ago.

This sort of behavior support the allegations made by critics of rising monopoly and oligopoly power in the US. They contend that one of the drivers of a decline in new business formation since 2000 is that there are fewer spaces in the economy where new businesses can find niches free of powerful entrenched incumbents. And that’s before you get to the fact that big tech players have engaged in anti-trust violations that were so egregious, namely collusion among the biggest players to suppress wages of over 100,000 engineers, that the normally toothless Department of Justice roused itself to Do Something. However, because the perps included the biggest names in technology, with Steve Jobs and Eric Schmidt as ringleaders, no one was going to go to jail. By contrast, price fixing in the lysine market in the early 1990s resulted in executives of public companies wearing orange jumpsuits.

Mind you, Facebook isn’t doing anything illegal. The story focuses on a plucky company called Houseparty that recently got $50 million from venture capitaliss led by Sequoia. Houseparty has developed an app that allows users to share one-minute video clips and chat about them on their smartphones.

Even though this would seem to be a narrow enough business so as to be able to co-exist with Facebook, Facebook thinks otherwise. The fact that Housebook has one million monthly users, a mere 0.1% of Facebook’s 2 billion members, is seen as a threat. From the Journal [note I’ve reordered the excerpts a bit]:

While it’s as easy as ever to start a company, it is getting harder to grow fast enough and big enough to avoid getting either acquired or squashed by one of the behemoths….

Lately, the titans also appear to be imitating smaller rivals more aggressively. In July, a week after the initial public offering of Blue Apron Holdings Inc., an Amazon subsidiary filed to trademark a meal-delivery kit with a tagline that echoed Blue Apron’s offering. Both Google and Facebook have taken aim at features on Snap. Inc.’s Snapchat platform…

For months, Houseparty could see Facebook in the rearview mirror. Last year, Facebook executives approached it for meetings the startup interpreted as exploring an acquisition. Then, two months after Houseparty publicly introduced itself as “the internet’s living room” in November, Facebook’s Messenger app said it would become a “virtual living room.”

Facebook in February launched a study of Houseparty, wooing its teenage users in a post that began: “Hi everyone!! Do you use Houseparty?”…

This fall, Facebook plans to launch an app similar to Houseparty, internally called Bonfire, say people familiar with the project.

One bit of good news is that Facebook has a lousy track record with launching stand-alone apps, but one of the Houseparty founders concedes that if Facebook were to depart from its usual approach and integrate Bonfire into Facebook, it would probably squash Houseparty. The article also makes clear that the VCs would favor a sale to Facebook at a suitably juicy price since that makes for a faster exit. And despite its promising start, its blue-chip backers and it having mastered some recent scaling challenges, Houseparty still faces an uphill battle:

The odds are already stacked against it. The average smartphone user has about 89 apps on a device but uses only seven or eight daily, according to Verto Analytics. Facebook, Apple and Google dominate, commanding about 60% of the time and 80% of the ad dollars spent on mobile, the market-research firm says.

In an interesting departure from what would seem to be Wall Street Journal norms, hardly anyone took the side of Facebook, when one would expect the default to be: “This is how business works. So what?” Admittedly, some of the antipathy toward Facebook was clearly the result of Zuckerberg’s alignment with the Democratic party. Some Journal readers, for instance, bizarrely depicted lax anti-trust enforcement as a liberal policy. Even though Clinton assigned a lower priority to anti-trust enforcement than his predecessors, giving monopolies and oligopolies close to a free pass has become a two party affair. But many heaped blame on Obama for meeting with Eric Schmidt and “having monopolies as their base”. But it’s not as if Trump is going to have a Damascene conversion on this issue.

Nevertheless, the indignation of many of the comments was striking:

Dolores Watson

It is time to break up big tech companies. We need someone to protect us against a few companies having total control over the internet.

Dan Laroque

Mark Zuckerberg started Facebook in secret while being funded by two guys with money at Harvard. It was their idea and he ripped it off. So, why would he change…

Zuckerberg is a predatory silicon valley billionaire…

Why should we be surprised that Mark baby would seek a total monopoly? Here is a rich white guy born with a silver spoon in his mouth with corporate diversity issues in a company with lots and lots of white men! He will rip off any idea he can discover.

JIM SHULER

Facebook, Google, Apple, and Amazon produce nothing the majority of us do not need. They are all over hyped and over rated. They are vultures and are bad for our country.

James Grundvig

Right out of the Bill Gates playbook. Don’t develop your own products, buy other companies’ products (Excel, Word, PowerPoint, etc.), then be a predator and kill competition. As John D. Rockefeller of Standard Oil famously quoted: “Competition is a sin.”

That’s funny, I believe Darwin had a different, natural view on competition.

It’s hard to know how widely these views are shared, but they suggest that big technology companies have a bigger image problem than they think. But until consumers are willing to vote against them with their wallets and eyeballs, it may not matter much.

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47 comments

  1. KPL

    “Dolores Watson

    It is time to break up big tech companies. We need someone to protect us against a few companies having total control over the internet. ”

    Why wait for someone to protect us. Why not protect ourselves through a mass protest aka boycott of the product you want protection. Just get your network and your network’s network and so on to get off from the platform. It just might work.

    After all, remember there was a life before facebook!

    1. Arizona Slim

      Since last fall’s election, I’ve been weaning myself off Facebook. It’s hard to describe how much better I feel. The words “amazing” and “awesome” come to mind.

      I’m also spending much less time on LinkedIn and Twitter.

      If more people make the decision that I have, those social media giants will be in big trouble.

    2. Dorn

      Facebook is like smoking was in the 1960s — “everyone does it.” As more and more people begin to understand the extent to which their lives have been given away, facebooking will begin to diminish. It will take decades.

  2. Livius Drusus

    I left Facebook years ago and never looked back. I agree that nothing will change until consumers start leaving the big tech companies. I keep hearing that younger people are not into Facebook as much and prefer Snapchat and Instagram. I am not sure if that is an improvement since I dislike most of these social media companies for non-economic reasons but I guess anything that reduces the power of the tech giants is a good thing.

    1. Anon

      My local community college advises students to avoid Facebook. It’s a tough enough job market without having to explain your foolishness at sixteen.

      1. flora

        They might look at the Diaspora social media project instead. Open source, distributed, you own your data, can be cross-shared with FB if you want, but your data does not reside on a FB server. This isn’t a recommendation, just noting a possible alternative for users.

        1. flora

          The fact that an open source, distributed, not publicly traded or venture capital backed organization still exists doesn’t not in any way contradict the premise of this post or of the WSJ article. NC and WSJ are right, imo.

        2. Seamus Padraig

          Thanks for the tip. I’m going to check out Diaspora. I already have an account on VK.com, but most of the content is still not in English.

  3. Massinissa

    And amidst all this Zuckerberg has the chutzpah to begin a presidential campaign while pretending he is not beginning a presidential campaign.

    I don’t think he will be that successful at politics though. Do people really have a lot of respect for him like they respect Bill Gates or the late Steve Jobs? I don’t think so, at least.

    1. Massinissa

      Note: Not that I respect either of them myself, but there is relatively commonplace respect for them, or for Gates at least, in my experience.

      1. SubjectivObject

        Which begs the question of why there should be any respect for the person that has caused tens of trillions of life hours to be wasted in using his coded application products?

      2. Vatch

        It is strange that many people respect Gates and/or Jobs. I try to explain to people some of the problems with them, such as their abusive behavior, and in the case of Gates and Microsoft, his propensity to copy other people’s work. Oh well.

      3. HopeLB

        The thing about Gates, in particular, is that he just can’t seem to stop himself from being part of/ funder of every wrong headed/nefarious thing coming down the pike (or maybe, more accurately, engineering the onslaught of wrong headed/nefarious “initiatives”) like Charter Schools/GMO’s/Monsanto pesticides/microloans/more H1B visas because of “skills” etc.,.. He is always popping up in articles having to do with the latest outrage. Schmitt and Zuck seemed to have learned from the best and in one of these articles, it quotes Gates saying he had learned everything from Buffet.
        https://www.dissentmagazine.org/article/got-dough-how-billionaires-rule-our-schools

        https://www.counterpunch.org/2015/05/21/sowing-the-gm-seeds-of-depopulation/

        https://www.counterpunch.org/2017/03/07/sweat-shops-gmos-and-neoliberal-fundamentalism-the-agroecological-alternative-to-global-capitalism/

      4. justanotherprogressive

        Where do you think Zuckerberg learned all of this from? Bill Gates and Microsoft are among the original “kill off the babies” companies in the Tech world – they didn’t invent patent trolling but they’ve used it to the hilt. And the use of lawsuits against companies that can’t afford to fight them has worked wonders for them too. I can’t even imagine all the innovation that has been stifled because of Microsoft.

        But obviously, none of that matters if you hire a good enough PR company – then everyone will “respect” you.

    2. shinola

      Tuesday’s (Aug. 8) Links featured a picture of a sign with an apropos message:

      “F*ck Zuck 2020”

      Needs to be on a bumper sticker…

      1. justanotherprogressive

        Facebook has a “F*** the Zuck page (one member) and a F***Zuck2020 page (24 members). I’m betting they get taken down if Zuck decides to run for President…..

        1. Kevin Carhart

          I don’t know if they will or won’t, but taking it more generically, I am fairly fascinated by this moment where the entity who runs a communications conduit puts their thumbs on the scale and tampers with the thing itself — or wants to but doesn’t.

          And when would they? And when wouldn’t they? Is it a gimmick or is it plausible? Do they do it if the transmission of the message is an existential threat to their own business?

          Tim Wu has a section in The Master Switch about Western Union and the AP skewing the contents of the telegrams themselves in order to throw the 1876 election to Hayes.
          http://www.nytimes.com/2010/12/12/books/review/excerpt-the-master-switch.html

          How do we transform the awareness that this feedback-loop type action sometimes happens, from a smirky aside into something with evidence for or against that would be a salient part of how we think about those mediums?

          The tenor of the content in question could be referred to in tiers based on how integral they are to that communications company. Would Facebook tamper if you use Facebook to leak evidence of crimes by a Facebook exec? Would they tamper to shut down a group that hurts their founder’s presidential bid? What about the Keystone protestors in the parking lot at the Facebook shareholder-meeting? (Maybe there is not anything salient that you could do to them anyhow.) What about the concerted activity around organizing Facebook bus drivers or guards, being discussed over Facebook? Would they leave these adversarial messages alone because it’s more important to them that they appear disinterested? Do they keep themselves in the dark because this is crucial for their argument that they’re a common carrier?

          What about Houseparty’s own Facebook account?

          Substitute all the other names for Facebook as well. What are the dynamics around allowing Signal to remain sound, pros and cons of tampering with Signal, from the point of view of owners and operators of app mediums?

          1. Tully

            Amazed at how easily so many of us participate in our own demise, even after having been warned. Orwell must be chuckling.

      2. Plenue

        I was thinking of buying one of them, but then I learned they’re being made by this website: http://unsavoryagents.com/.

        The front page has a little rant saying they started the website because they were tired of liberals (supposedly) having a monopoly on how Republicans were portrayed; always shown as homophobic and cruel. At which point you can then go into their store and buy such fine products as ‘Muhammad was a Homo’ T-shirts and ‘It’ transgender bathroom stickers.

        We rag on the vichy left constantly, as well we should, but it’s good to be reminded occasionally that many conservatives really are just unapologetic douchebags. They seem to revel in being assholes.

  4. flora

    A preditory monopolist destroying competition is one reason anti-trust laws exist. It’s not just about money costs to the consumer. It’s about destroying any competition that might hurt money stream to the monopoly – in this case, advertising dollars. It’s also about quality of product and responsiveness of the company.

    Monopolists have too much control of the market and can degrade the quality of the product in many subtle ways. Very harmful to consumers.

    Thanks for this post.

    1. Wisdom Seeker

      > “Mind you, Facebook isn’t doing anything illegal”

      But what it’s doing SHOULD BE illegal.

      Why are we no longer criminalizing behavior this egregiously anti-competitive? Because it has become “normal”.

      How far we have fallen….

    2. Scott

      I live in North Carolina. All tax credits for renewables were lost a couple of years ago. Biofuels had been growing independently. Considered third in the nation for solar, well the strategy is to absorb all independent installers and put them in uniforms.
      “No competitor is too small to not crush.”
      I had a Democratic Party position as a Precinct Vice Chair. I’d worked at making sure the legislature would be briefed by those of the engineering university on Renewables & Energy Capture. I was going to make sure they could not plead ignorance as a basis for the laws they made.
      Briefing was scheduled for after the vote. “Don’t worry, we have a secret plan.”
      Democrats: “Don’t do things in order. Don’t do follow up. Lie about losses in the fine print.”
      The quotes are self referential.
      Non of us really has anything more valuable than our citizenship. We needed to be protected from monopolies before and need that protection now more than ever.
      OK, we have life, for as long as we have it, and that is more valuable than our citizenship. Still part of the human condition is being alone like the cook in the water as the ship goes by at the end of James Jones’ Whistle. He was part of the nation till he couldn’t stand it anymore & decided to jump ship & die.

  5. polecat

    I use NONE of these internet behemoth’s .. uh .. ‘products’, ‘apps’, or what have you, and lo and behold, I don’t feel the least bit deprived !!

    1. Anon

      …then you don’t have a smartphone, use Chrome/Firefox as a browser, and while using Opera to surf the net use Duck Duck Go to search. Unforeseen to many, is that most websites (excluding NC) have “partnered” with Google/Facebook, etc. to get your meta ID surreptitiously. (And sell it for a profit.)

      1. flora

        Yes.
        USNews had a story out a year ago that in part explains how Google has made itself the arbiter of what is deemed a good site. (Sort of like the ratings agencies. ha.)

        “The key here is browsers. No browser maker wants to send you to a malicious website, and because Google has the best blacklist, major browsers such as Safari and Firefox – and Chrome, of course, Google’s own browser, as well as browsers that load through Android, Google’s mobile operating system – check Google’s quarantine list before they send you to a website.

        “If the site has been quarantined by Google, you see one of those big, scary images that say things like “Get me out of here!” or “Reported attack site!” At this point, given the default security settings on most browsers, most people will find it impossible to visit the site – but who would want to? If the site is not on Google’s quarantine list, you are sent on your way.

        OK, that explains how Google blocks you even when you’re using a non-Google browser, but why do they block you? In other words, how does blocking you feed the ravenous advertising machine – the sine qua non of Google’s existence?

        Have you figured it out yet? The scam is as simple as it is brilliant: When a browser queries Google’s quarantine list, it has just shared information with Google. With Chrome and Android, you are always giving up information to Google, but you are also doing so even if you are using non-Google browsers. That is where the money is – ….”

        https://www.usnews.com/opinion/articles/2016-06-22/google-is-the-worlds-biggest-censor-and-its-power-must-be-regulated

        1. Anon

          They might, but none that get through my mix of blocking software. They don’t use Facebook “Likes”, at least (as far as I can tell).

        2. flora

          Depends on the ad service used. Google’s Adsense is the biggest ad service but their are others.

  6. kurtismayfield

    This sounds like something for the 16-24 set, who are not on Facebook.. they all use Snapchat so their family members can’t have any of their nefarious deeds and behaviors shared with family. House party sounds similar to Snapchat, where only people that are invited into the circle can share… Facebook probably wants their own version of this market.

  7. Namma

    Go old school. The Internet and Web were living and very, very active before Facebook and Google.

  8. Mel

    “Produce nothing the majority of us do not need”?

    OK

    Produce something the majority of us do not need?
    Produce everything the majority of us do not need?

    Hmph.

    1. Science Officer Smirnoff

      To accord with NC site policy

      I have decided to withhold my Henry James reading comprehension test since it is intended for Yves’ posters, not the WSJ’s.

      :-)

  9. Timmy

    As a result of my profession, I recently spent time with a well-known large cap growth equity manager. That particular day he happened to be on the front page of the NY Times being quoted about how Whole Foods needed to be restructured. This was just a few days before the Amazon/Whole Foods deal.

    Anyway, when this fellow was asked a general question about the “next big thing”. He replied…”Everything “rolls up” to Amazon and Google and Facebook. They are flush with capital and so plugged in to the global venture business that they see anything ground breaking before anyone else and then they can choose whether to buy it or replicate it”

  10. jfleni

    One sugggestion for anybody with a web site: A place called ” “Honourable Mention” which would be a free link or even a small ad praising some site, commercial or not, the webmaster especially likes and admires.

    That would get Herr Buttbook to start eating his ratty T-shirt.

  11. Plenue

    “And that’s before you get to the fact that big tech players have engaged in anti-trust violations that were so egregious, namely collusion among the biggest players to suppress wages of over 100,000 engineers, that the normally toothless Department of Justice roused itself to Do Something.”

    Whatever happened with this? From the workers side I mean. Did anyone try to unionize?

  12. Kate

    No surprises here. It’s how capitalism works. Don’t blame just Facebook blame the system that enables it.

  13. Praedor

    Well, THIS guy has been speaking with his wallet/account. I left Facebook several years ago due to privacy concerns and refuse to re-sign up. Google…I have been setting up replacement email(s) and getting ready to migrate away from gmail (don’t like Google’s new schtick of “Do Evil”) and have gone over to Duck Duck Go for searching. Have setup accounts on Minds, Vid.me, and the like to start getting away from YouTube (Google by another name) and it’s insane censorship and PC enforcement progrom. They aren’t just targeting rightwing vids, they are going after ALL videos that they deem in any way “controversial”, so a criticism of art, a climate change video, etc, can all be censored now because someone determines the subject to be “controversial”. They do NOT censor VERY far left videos though…at least not yet.

    Amazon…haven’t dumped them yet. Use them for some purchases but refuse to do Prime.

    1. MyLessThanPrimeBeef

      Bannon is for regulating those tech giants and for taxing the rich?

      What is his position on Single Payer?

Comments are closed.