Last year Facebook (NASDAQ:FB) tried to buy Snapchat for $3 billion. That offer was rebuffed, which may have led to the social media giant paying $19 billion for the WhatsApp instant messaging service instead.
Now, Facebook has Snapchat in its sights again but this time it wants to knock the upstart company off its perch. Facebook has launched Slingshot -- an app that shares many of Snapchat's features, but with a twist. The app was created by Creative Labs, a group inside Facebook built to encourage employees to take risks and speed up innovation.
The move is the latest in Facebook's extensive efforts to diversify its product line beyond its core platform. The company has had success buying other products and running them as stand-alone brands. WhatsApp has continued to grow since it was acquired in February as has Instagram, which the company paid $1 billion for in 2012. Facebook has had less success launching its own apps -- Poke, its first attempt to compete with Snapchat, has been discontinued, while Paper has not developed a following yet.
What is Snapchat?
Snapchat is a photo messaging application that has become enormously popular with teenagers. Users can shoot photos, record video, and modify them with text or drawings. They then send the pics or videos to a friend or group. These so-called "Snaps" are fleeting -- the sender sets a certain amount of time from when the viewer opens it (usually 10 seconds or less) before it disappears -- both from the viewer and the Snapchat servers.
Though Snapchat does not specifically acknowledge this on its sparse website, the lack of permanence has made it a popular service for people sharing racy or otherwise illicit photos and video.
In January, Forbes estimated that 50 million people currently use Snapchat with a median age of 18 (Facebook's median age is around 40). Even more impressive is that over 77% of college students are using Snapchat at least once every day, according to research by Sumpto.
At the time of Facebook's offer the company had no revenue and no plans for revenue. That has changed a little as Snapchat has rolled out some new features that are ad-friendly. But the brand faces a slippery slope monetizing because free products have a history of being abandoned once ads are added.
How Is Slingshot different/the same?
Facebook's Poke was a Snapchat copy; Slingshot is more of a variant. The app includes the feature where photos and videos disappear after a set amount of time, but it also requires that recipients send a message in order to view what was sent to them. The company explained the app on a blog dedicated to the new product.
With Slingshot, we wanted to build something where everybody is a creator and nobody is just a spectator. When everyone participates, there's less pressure, more creativity and even the little things in life can turn into awesome shared experiences. This is what Slingshot is all about.
Photos and videos that don't stick around forever allow for sharing that's more expressive, raw and spontaneous. We can connect the same way we like to live: in the moment. We've enjoyed using Snapchat to send each other ephemeral messages and expect there to be a variety of apps that explore this new way of sharing. With Slingshot, we saw an opportunity to create something new and different: a space where you can share everyday moments with lots of people at once.
To get started on Slingshot, shoot a photo or video. It can be what you're up to, who you're with or a quick selfie. Add some text and color, then sling it to a bunch of friends. Here's the deal: friends won't be able to see your shot until they sling something back to you. They can then reply with a reaction -- or simply swipe your shot away.
Slingshot basically stops people from being voyeurs and forces a conversation. It's an interesting idea but it seems like it will create disjointed conversations if you have to send something before you can see what was originally sent to you. Perhaps a friend sent you a picture of a birthday card and you -- expecting something a little racier -- send off a cheeky photo. Once you open the original "Sling" there may be a lot of apologizing required.
How will Facebook make money?
While SnapChat's plan appears to be to build a huge audience then either sell or figure out how to make money down the line, Facebook has easier paths to monetization if it can build an audience. The company currently makes most of its revenue through ads and there's no reason it could not cleverly add advertisements to Slingshot.
This could be as simple as an interstitial (an ad that comes up before you can see the content) to more complicated ideas like allowing brands you "like" to Sling at you. Facebook could even extend its micro-ad network and allow bands, performers, and people with Facebook fan pages to message people who like them for a fee.
It's also possible that Facebook could follow the WhatsApp model and give the app away for a year then charge a tiny amount ($1 in the case of WhatsApp) to already hooked users. The company could also sell add-ons the way popular apps do. Want to add Mr. T virtually standing next to you in a Sling? That costs $1. If people use Slingshot -- and that's a big if -- the company can monetize in a variety of ways.
Will it work?
Facebook has struggled in its attempt to launch new platforms. While it successfully spun Facebook Messenger off from its main app, Poke and Paper have so far disappointed. The company is operating Slingshot as a stand-alone brand and treating it like a wholly owned start-up.
If Facebook can build an audience it has shown that it can make money off that audience. The challenge is hooking enough users to unseat a popular incumbent.
Snapchat's users like the service and are unlikely to switch. Of course, 50 million -- or even 100 million users -- are a small fraction of the billion Facebook has on its main site and the similar number using the Messenger app. Add in the over 500 million people (mostly not in the United States) using WhatsApp and the company certainly has a base of people it can market to.
Disappearing photos and video has been a young person's game and Snapchat has captured that audience. Facebook faces an uphill fight to steal some of that user base. The functionality of Slingshot and the forced interaction seems unlikely to appeal to older users. By dedicating a small internal group to launching new products, Facebook gives itself a chance to innovate and create the next big thing, but it seems unlikely that the next big thing will be a variant on an already successful product.
Daniel Kline 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.