Facebook (NASDAQ:FB) is shutting down two of its apps this month, Lasso and Hobbi. Both apps borrowed heavily from competitors in social media.
Lasso was a clone of TikTok, providing tools to create and share short videos. Hobbi looked a lot like Pinterest (NYSE:PINS), giving users a place to collect images and ideas related to their hobbies. Both apps were run by Facebook's New Products Experimentation team, and while Lasso lasted a couple of years, Hobbi was less than six months old.
Facebook's decision to shut down the two apps shouldn't have a major effect on the company's day-to-day finances. But it also doesn't mean ByteDance, TikTok's parent company, and Pinterest can breathe easy. The 800-pound gorilla of social media will undoubtedly continue working to co-opt the best features from its rivals and make them its own.
Still failing to copy Snapchat
Facebook tried and failed to copy Snap's (NYSE:SNAP) Snapchat several times before it hit on something with Instagram Stories. There was Poke and Lifestage and Slingshot and Instagram Bolt, which all copied at least one key feature of the smaller app.
But even since launching Stories and scaling it to hundreds of millions of users, Facebook is still looking to take the best features from Snapchat and provide them to its own users. It launched Threads in October last year, which focuses on quick visual communication with close friends.
Facebook doesn't really expect these products to catch on. But when they do, it's able to scale quickly and start monetizing them. Instagram Stories went from launch to 150 million users in less than six months when Facebook started showing ads to Stories viewers. Last year, Stories helped generate about $7 billion in ad sales.
Failure is just part of the game. Learning what doesn't work can get Facebook closer to something that does. And when it does, it could mean billions in additional ad revenue for investors in the FAANG stock.
Still gunning for TikTok and Pinterest
While Facebook has shut down Lasso and Hobbi, there's still a lot of potential for the company to find success copying the competition's features in other ways.
For one, it still operates Instagram Reels, another TikTok clone under the Instagram umbrella. It launched in Brazil in November and expanded to France and Germany last month. The app appears to be gaining more traction than Lasso ever did. Instagram is considering deeper integration with its main app, which could accelerate user growth.
Meanwhile, Facebook's interest in facilitating commerce through its apps couldn't be stronger. It launched Shops in May, and it announced an expansion to Instagram Shopping later this month to make it available to nearly all businesses and creators on the platform.
Currently, shopping on Instagram or Facebook lacks intention compared to Pinterest's platform, where users collect ideas. Pinterest is practically able to create a custom catalog for each of its users when they're looking to buy something for their home, wardrobe, or big event. Comparatively, Instagram is more like window shopping and Facebook is full of ads for impulse purchases.
But Facebook is laying strong groundwork for more of a Pinterest-style experience. And while it could be years away from encroaching on Pinterest's biggest driver of revenue growth, it's going to keep looking for ways to win over Pinterest's users right now. All of Facebook's other work in social shopping indicates it's not done trying to copy its smaller rivals.
The next source of growth
If and when Facebook finds success copying TikTok or Pinterest, it could spark a new source of growth for the company. It's already facing ad load saturation challenges in its feed products, and Stories can't be too far behind. Facebook will eventually need a new surface or source for engagement in order to keep growing revenue at the pace investors have seen over the last few years.
Pinterest generated $1.1 billion in revenue last year, and TikTok is expected to generate $500 million in the U.S. this year. That's not much compared to Facebook's $71 billion top line in 2019.
But those numbers also belie the potential for Facebook if it can succeed in copying either company's features. Snap generated just $400 million in revenue in 2016, the year Facebook launched Stories. Now, Stories are a major contributor to the company's top line.