Facebook (META 0.14%) lost about 16% of its market value since the revelation that the data of 50 million users was sold by an app developer to Cambridge Analytica, a data firm hired by the Trump campaign in 2016. Subsequent revelations -- including unauthorized logs of calls and text messages, an FTC probe, and a damning "growth at any cost" memo from a Facebook VP -- further damaged its reputation.
Facebook's swoon might be temporary, however, since there isn't a viable alternative to the service it provides. Some users might delete their accounts, but Facebook's overseas growth could easily offset those declines. Other users might flee to Instagram, without realizing that Facebook also owns the popular photo and video sharing app.
Image source: Facebook.
Nonetheless, Facebook's pain could also create opportunities for other companies that indirectly compete against the social network. Let's take a closer look at three companies that could benefit from Facebook's pain -- Snap (SNAP -0.18%), Line (LN), and Alphabet's (GOOG 1.43%) (GOOGL 1.42%) Google.
Snap
Snap isn't a fan of Facebook, which tried to buy its ephemeral messaging app Snapchat for over $3 billion in 2013. After Snap's rejection, Facebook positioned Instagram -- which it purchased the previous year -- as a challenger to Snapchat.
Instagram added ephemeral messages, filters, masks, and "stories" to counter Snapchat's growth. As a result, Instagram's daily active users (DAUs) hit 500 million last September. Snap's DAUs rose 18% annually to just 187 million last quarter.
Snapchat might seem like David to the twin Goliaths of Facebook and Instagram, but it's heavily favored by younger users. eMarketer estimates that Facebook will lose two million users ages 24 and under this year. Meanwhile, Snapchat could gain 1.9 million users in that age group, while Instagram might gain 1.6 million. The firm estimates that Snapchat also has more 12-to-24-year-old users than Instagram.
Image source: Google Play.
If Facebook's freefall continues, more users -- especially older ones who generally stay on Facebook -- could consider alternative social media platforms like Snapchat, which has been reaching out to older users.
Line
Facebook Messenger is currently the most popular social networking app in the US according to App Annie. But it's less popular in Japan, Taiwan, Thailand, and Indonesia -- the four top strongholds for Japanese messaging app Line. Line had 168 million monthly active users (MAUs) across those four markets at the end of 2017, representing a year-over-year decline of one million users.
Line isn't just a messaging app. It's an all-in-one platform for sharing photos, reading comics, listening to music, buying products, and making mobile payments. These services let Line lock in its users and squeeze out more revenue per user, which offsets its sluggish MAU growth. It's also expanding its ecosystem with new products like its Clova smart speakers.
Line's Clova smart speakers. Image source: Line.
Competition from Facebook Messenger is often cited as a major headwind for Line. However, Facebook's Cambridge Analytica fiasco -- which was widely publicized across Asian media outlets -- could push more users toward Line, which has its own Facebook-like news feed.
Facebook's top competition in internet-based targeted advertising is Google. Therefore, it's reasonable to assume that Facebook's pain -- which caused several high-profile advertisers to pull their ads off the social network -- might be Google's gain.
Google also mines user searches and data to craft targeted ads, but that information is generally considered less personal than a social media profile. Google tried to enter the social networking market before, but none of its products -- including Orkut, Latitude, Buzz, Jaiku, Dodgeball, and Google+ -- ever matched Facebook's appeal.
Yet that curse could now be a blessing for Google, which can claim that Facebook "crossed the line" by letting app developers harvest users' personal data. Privacy advocates might argue that Google -- which repeatedly expands its ecosystem to accumulate more data -- is an even bigger threat than Facebook. But as long as Google distances itself from Facebook, it could be considered the lesser of two evils.
