Facebook Inc.'s Next Big Project: Take Down Snapchat?

Facebook aims to beat Snapchat. But is a triumph likely?

May 20, 2014 at 4:25PM

Snapchat co-founder and CEO Evan Spiegel will turn 24 next month. Leading one of the fastest-growing social networks in the world, he's worth quite a bit of money. In fact, Spiegel believes his photo-sharing social service is worth more than $3 billion, based on Facebook's (NASDAQ:FB) rejected offer of that amount to acquire the company. But did he make a mistake in dismissing those billions? Now Spiegel may have to fend off an upcoming competing app from Facebook, internally named "Slingshot," in order to maintain his app's dominance.

Facebook Tmf

How strong is the network effect?
Facebook has been working on a video-sharing app that is positioned to compete head-to-head with Snapchat, the Financial Times reported, citing "people familiar with its plans." The "top-secret" project is headed by Facebook chief Mark Zuckerberg himself and could be launched as early as this month, according to FT. Slingshot will reportedly "allow users to send short video messages with just a couple taps on the screen."

Fb Paper

Facebook's launch of Paper was the first project to emerge from the new Facebook Creative Labs that is purposed to unbundle the value of the company's monthly active users by offering stand-alone apps. Image source: Facebook.

The app would be in line with the company's efforts to push stand-alone apps. Zuckerberg has emphasized that he sees big potential for Facebook's business in finding new ways to create value out of its user base in more personalized applications.

"We just think that there are all these different ways that people want to share, and that compressing them all into a single blue app is not the right format of the future," Zuckerberg told Bloomberg Businessweek in a January interview.

But Slingshot will have a tough obstacle ahead. Zuckerberg knows better than anyone how strong a network effect is. He cited users as a major competitive advantage when he was attempting to justify the $19 billion valuation Facebook gave the multiplatform messaging service WhatsApp. "WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," Zuckerberg said in the press release announcing Facebook's acquisition of the service.

Sure, Snapchat's niche market of teens and college students may limit its potential to less than 1 billion people, but Zuckerberg did acknowledge the network was worth a considerable sum when he offered $3 billion for the service. With Zuckerberg himself recognizing the value of Snapchat's fast-growing user base, don't expect the photo-messaging app's selfie domination to be defeated by Facebook's Slingshot project anytime soon.

A more shareholder-friendly approach?
The best news out of all of this is that Facebook is relying on internal innovation instead of spending billions. After recent big-dollar prices to acquire WhatsApp and Oculus VR, it would be extremely reaffirming for Facebook shareholders if the social network can show it can innovate without paying speculative amounts.

News of the Slingshot project doesn't alter the outlook for Facebook's business. At this point, the secret project is nothing more than a hopeful and unproven aspiration. Even if the company eventually manages to eventually trample over Snapchat, a $150 billion market capitalization for Facebook stock seems to have mostly priced in such triumphs.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers