The writing is on the wall.
As you’ve probably heard, TikTok has come under fire yet again. After Apple
That’s terrible news for TikTok. And wonderful news for Facebook (FB
TikTok poses a major threat to Facebook’s social media dominance. And America’s social media giant has been plotting TikTok’s takeover since 2018. With the White House on its side, Facebook now has a rare chance to pull it off.
And as I’ll explain, Facebook’s recent actions hint that this could happen as soon as this year. All this bodes very well for Facebook stock.
Facebook has a predatory track record
Look at this chart, which shows the world’s most downloaded apps in 2019:
Four out of the five most popular apps on this list are owned by Facebook. Facebook dominated this starting line-up for years.
But the company has kept its ranks not because it came up with all these apps. It’s because it bought or knocked off every “next big thing” in social media before it grew too big.
In 2010, Instagram introduced a hip photo-sharing mobile app with retro filters. It flew out of the gate and became one of the most downloaded iPhone apps. Two years later, Facebook bought it for $1 billion.
In 2014, WhatsApp became the world’s second biggest messaging app. Leaked Facebook emails showed the company took it as a potential Facebook Messenger killer. After lots of failed bids, Facebook forked over a steep $19 billion just to get it out of their way.
Then Snapchat (SNAP) came along. Stanford graduates came up with a whole new social media sharing concept: photos and videos that disappear in 24 hours. The feature has become all the rage.
When Snapchat blew up to 150+ million users in just a few years, Facebook fell all over itself to buy it. Snapchat refused, and Facebook blatantly ripped its signature feature and introduced it on Instagram. It’s what today we know as Instagram Stories.
In the end, Stories became the meat and potatoes of Facebook social networks. And meanwhile, Snapchat’s growth has nearly stalled for three years.
Put another way, Facebook is like a mad dog that goes at every squirrel that dares step into its yard. And TikTok is the last squirrel to trespass into Facebook’s territory.
TikTok is the next big thing (and therefore Facebook’s target)
TikTok is like blockchain. Everybody has heard of it, but nobody is sure what it’s all about. (Especially those born before 2000.)
In short, TikTok is a Chinese social network where people create parodies and otherwise frivolous short mobile videos. They dance, lip-sync, sign, or act out trending scenes, jokes, or songs.
This is a whole new social media format that has taken the world by storm. Since 2016, TikTok has grown into 1 billion users. A staggering 500 million of those users signed up last year alone. (That’s half of all Instagram users.)
But TikTok is a particularly big thing among teenagers, known as Generation Z. Nearly 60% of all TikTok users are Gen Zers. And according to Ypulse, TikTok already beats Facebook’s app in popularity among America’s youngest and largest generation. This has put Facebook on notice.
Facebook has been plotting TikTok’s takeover since 2018
Facebook made its first attempt to kill TikTok in 2018 after it hit 650 million users. America’s social media giant launched a copycat app called Lasso, but it didn’t draw much interest and Facebook shut it down.
After that failed attempt, Facebook reverted to its old tried and true way of crushing its competitors by ripping off their features.
Last November, Facebook’s Instagram launched a feature called Reels. But you probably haven’t heard about it because it was only available in Brazil. (I’ve tried it myself, and I can tell it’s a straight TikTok copycat.)
Last month, Instagram expanded the feature to France and Germany. And two weeks ago, after India’s government banned TikTok, Facebook swiftly introduced Reels to India’s 1.3 billion people.
Now it’s a matter of time before Facebook rolls out its TikTok feature to the rest of the world.
Facebook could make a move this year
Last Monday, after Apple’s report, Secretary of State Mike Pompeo floated a potential ban on Tik Tik. He also blasted TikTok, saying Americans should only use the app “if you want your private information in the hands of the Chinese Communist Party.”
Asked about Pompeo’s remarks the next day, Trump confirmed that his administration is considering pulling the plug on TikTok in the US. The timeline and other details are murky, but one thing is clear.
This whole China-America skirmish gives Facebook a rare chance to get rid of its biggest competitor without breaking a sweat. And it won’t pass up this opportunity.
If Trump goes through with his threats and bans TikTok, I’m almost certain Facebook will charge ahead and roll out its TikTok copycat in the US as soon as this year. Just as it did in India.
Even if TikTok holds out, the bad publicity should help Facebook win over TikTok American users. And Facebook probably won’t wait until next year when the news dies down.
Facebook stock will be the biggest winner in TikTok’s demise
Knocking off Snapchat has been one of Facebook’s best moves. It cemented its dominance in social media and added half a million sets of eyeballs to advertise to.
Since then, Facebook’s advertising revenues exploded 256%. Meanwhile, Facebook stock more than doubled.
TikTok is Facebook’s second Snapchat moment. If Instagram’s Reels catches on, Facebook can pull in another couple of hundred million users. (Or multiply the screen time of its existing users.)
We are talking billions of dollars in extra advertising revenue. For this reason, I’m closely watching Facebook stock as this whole TikTok drama plays out.