From the Wall Street Journal:
Tech startups live by the rule that speed is paramount. Houseparty, creator of a hot video app, has an extra reason for urgency.
Facebook Inc., a dominant force in Silicon Valley, is stalking the company, part of the social network’s aggressive mimicking of smaller rivals. Facebook is being aided by an internal “early bird” warning system that identifies potential threats, according to people familiar with the technology.
This fall, Facebook plans to launch an app similar to Houseparty, internally called Bonfire, say people familiar with the project. Both apps let groups of people hang out over live video on a smartphone.
“They see we’re having traction,” says Sima Sistani, co-founder of Houseparty, which is based in San Francisco. “That’s why we’re pushing so hard.”
Silicon Valley is dominated by a few titans, a development that’s fundamentally altering the nature of America’s startup culture. While it’s as easy as ever to start a company, it is getting harder to grow fast enough and big enough to avoid getting either acquired or squashed by one of the behemoths.
For months, Houseparty could see Facebook in the rearview mirror. Last year, Facebook executives approached it for meetings the startup interpreted as exploring an acquisition. Then, two months after Houseparty publicly introduced itself as “the internet’s living room” in November, Facebook’s Messenger app said it would become a “virtual living room.”....MUCH MORE (a major piece)
Facebook in February launched a study of Houseparty, wooing its teenage users in a post that began: “Hi everyone!! Do you use Houseparty?”
The deep pockets of giants such as Facebook, Alphabet Inc.’s Google, Apple Inc. and Amazon.com Inc. make it increasingly difficult for startups to compete and stay independent. The four firms have a combined market capitalization of almost $2.5 trillion, a rough equivalent to the annual gross domestic product of France.
Facebook acquired photo-sharing app Instagram in 2012 for $1 billion and messaging service WhatsApp in 2014 for $22 billion. Google in 2013 bought Waze, a rival to Google Maps. Amazon in 2010 bought Quidsi, the online retailing company behind diapers.com and other sites, after trying to copy it.
Lately, the titans also appear to be imitating smaller rivals more aggressively. In July, a week after the initial public offering of Blue Apron Holdings Inc., an Amazon subsidiary filed to trademark a meal-delivery kit with a tagline that echoed Blue Apron’s offering. Both Google and Facebook have taken aim at features on Snap. Inc.’s Snapchat platform. Amazon declined to comment. Google didn’t respond to requests for comment.
At an all-hands meeting last summer, Facebook Chief Executive Mark Zuckerberg told employees they shouldn’t let pride get in the way of serving users, another way of saying they shouldn’t be afraid to copy rivals, according to someone who was at the meeting. The message became an informal internal slogan: “Don’t be too proud to copy.”
Facebook executives have said publicly it is common in tech for companies to build on technologies pioneered by others.
Regulators, politicians and academics are increasingly questioning how tech giants use their considerable clout. In June, the European Union’s antitrust regulators fined Google $2.71 billion, saying its search engine favored its own comparison-shopping service over others. Google has said it disagrees with the conclusions and will consider an appeal.
“If you’re an app, are you better off getting acquired or competing against one of the big platforms?” says Scott Stern, management professor at Massachusetts Institute of Technology. While getting acquired can be “a very good win for the founders, that might be at the expense of a more competitive landscape.”....
