Actions speak louder than words, and despite Snap (NYSE:SNAP) CEO Evan Spiegel's comments on the company's first public earnings call, Snap is very much concerned about competitors copying its most popular features.
Bloomberg reported last week that Snap had acquired the team behind Strong.Codes, a small start-up based in Switzerland that specializes in obfuscating code. The smaller company says it can help "Protect your software against reverse-engineering!" Snap previously hired co-founder Laurent Balmelli in February, but has since recruited the rest of the team to join the Snapchat operator, according to the report.
"enjoy the fact that people are going to copy your products"
When asked directly about Facebook's (NASDAQ:FB) seemingly relentless drive to "bury Snapchat" on the earnings call last month and whether or not that scares Snap, Spiegel brushed off the concern:
And I think our overall strategy, obviously, which is to deliver value through creativity. And I think the bottom line is, like, if you want to be a creative company you've got to get comfortable with, and basically enjoy the fact that people are going to copy your products if you make great stuff. And I think we've seen this happen a lot in technology.
This nonchalant comment goes beyond the whole "imitation is the sincerest form of flattery" bit. Facebook is a large, well-funded, agile, and determined competitor that wants to destroy Snap, and Spiegel needs to take the competitive threat very seriously. Spiegel's dismissive comments belie the actions that Snap is trying to take to prevent copying.
Why this move will fail
Ultimately, the hires will probably do little to nothing to stop Facebook from copying. Think about all the controversy surrounding software patents over the decades. This is an issue that the tech industry has tried to grapple with since the 1960s, with no clear conclusion. Software patents typically cover a specific way to implement an idea, not the idea itself; some argue the idea should be included in the patent. The Supreme Court ruled unanimously in 2014 that "abstract ideas" cannot be covered by a software patent.
This is why Snap recruiting engineers that specialize in blocking reverse engineering isn't going to make a difference. Facebook doesn't need to copy Snap's code directly. If anything, Facebook's software engineering resources are far greater than Snap's, and it can easily design and code its way around Snap's specific technical implementations. It's not as if Snap discovered some revolutionary way to display photos in a chosen order with captions, which is all its popular Stories feature is. It's also unlikely that Facebook needed to reverse engineer the code when it created Instagram Stories, which now has more daily active users than Snapchat -- by far.
As far as photo and video filters go, Facebook acquired Masquerade last year, which provided the groundwork for all of the photo and video filters the social network has been rolling out more recently. Again, it doesn't need Snap's code. It doesn't matter how strong the code is or how resilient it is to reverse engineering -- Facebook is not giving up.
Evan Niu, CFA. owns shares of Facebook and has the following options: long January 2019 $20 puts on Snap Inc. and long January 2018 $120 calls on Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.