Silicon Valley has become synonymous with innovation, assigning the highest value to original and groundbreaking ideas. With that, copycatting is thought of as a cardinal sin; a dirty, get-rich-quick scheme that rarely makes a company look good.
But copycatting happens more often in Silicon Valley than many would like to admit. The latest case -- between social media rivals Facebook (FB) and Snap (SNAP) -- has played out on a public stage over the past several months, kicked off by the launch of Instagram Stories last August, which was instantly labeled as a clone of Snapchat Stories.
Snap has been adding fewer new users to its platform in the past several months (five million new users were added in the fourth quarter vs. 15 million in the third quarter) and Instagram Stories is widely considered to be a primary reason for the slowdown. Facebook's growing competition with Snap is also a major factor behind Wall Street's predominantly bearish stance on the stock.
More recently, there's been WhatsApp Status, Messenger Day and Facebook Stories, all of which capitalize on Snap's idea of sharing ephemeral photos and videos, a feature that's disrupted traditional avenues of communicating. Facebook first appeared to copy Snapchat when it introduced Poke, a feature for sending disappearing photos and messages, back in 2012, as well as Slingshot, an app that allows users to draw text on photos or videos, in 2014. Facebook eventually killed off both Poke and Slingshot.
Facebook is hardly the first tech behemoth to clone another company's ideas. Microsoft (MSFT) famously derived its game-changing Windows 98 operating system from Apple's (AAPL) original Macintosh OS, an idea that Steve Jobs himself conceived after a visit to Xerox's (XRX) Palo Alto Research Center.
"If you want to destroy your competitor, [copying is] what you do," said Johnny Won, founder of tech consulting firm Hyperstop. "These are the ways that Microsoft became Microsoft, by using the same [copycatting] tactics."
"Alphabet's (GOOGL) Google has done the same thing for years and Snapchat will eventually do it, too," he added.
Issues of copying appear more obvious among mobile and social networking companies because they develop direct-to-consumer applications, said Chi-Hua Chein, managing partner at venture capital firm Goodwater Capital. Companies are also pushing out similar products at a faster rate than in the past because they don't necessarily have to copy a bunch of complicated code to copy rivals' features.
Facebook, Apple and Alphabet are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells FB, AAPL or GOOGL? Learn more now.
At the same time, it's also harder for internet companies to protect and prevent rivals from stealing their code, product design and ideas in general.
"Some companies are protected because they have intellectual property -- trademarks, patents or copyrights that give them rights for seven to 14 years," said Paul Meeks, chief investment officer at investment firm Sloy, Dahl & Holst. "Snap doesn't have incredible intellectual property if they can be copied so easily."
Snap's ability to hold off Facebook's copycat Stories features has had real implications for its livelihood as a public company. Not only has its stock tumbled almost 21% since its opening trading price of $24 earlier this month, but investors and analysts fear that Snap could eventually become irrelevant if it doesn't continue to innovate, Meeks said.
That said, Facebook's decision to copy Snap hasn't come without consequences. The social media giant faced some backlash from users about Messenger Day being disruptive to its Messenger app -- Messenger now prompts users to post a story to Messenger Day at seemingly every turn and is featured prominently at the top of the app.
Members of the tech community had some choice words about the new product, as well. M.G. Siegler, a general partner at GV, Alphabet's investment arm, wrote that he tries to keep an open mind when tech companies roll out new features.
"I gave 'Messenger Day' a few days," Siegler said. "I still absolutely hate it."
At a personal level, Snapchat executives and insiders have not been shy about sharing their displeasure with Facebook's moves. Snap's vice president of product, Tom Conrad, sent off a fiery tweet last week to Instagram's head of product Kevin Weil that not-so-subtly hinted at the company's numerous Snapchat clones. And Evan Spiegel's fiancée, model Miranda Kerr, said she was "appalled" by Facebook's copying tactics, questioning how the company "sleeps at night."
Wherein the Product VP @Snap takes a shot of his own.March 16, 2017
Facebook seems to be taking a lot of chances -- even beyond Facebook's aggressive standards -- in its most recent slate of product launches, Siegler said. And in this case, Facebook has been willing to leverage its 1.8 billion users in a "ground war" to beat Snap, he added, showing how seriously Facebook views Snap.
Snap's rising threat has prompted Facebook to "sacrifice the user experience" in order to catch up with the fledgling social media platform, Dawson wrote in a blog post, but Dawson believes Facebook didn't really need to make that sacrifice. Instagram Stories was introduced "unobtrusively" to the app in a way that had a positive impact on the user experience, so why would Facebook choose to unleash the clones across all of its other platforms?
The simple answer is user reach. Instagram has a sizable user base of about 600 million active accounts, but Facebook's core platform has at least 1.8 billion, so the social media giant stands to gain even more usage of its Stories-like products if it's added across all its platforms, instead of just restricting it to Instagram or WhatsApp (which has 1 billion monthly active users).
"It's about reaching as many people as possible in different places," Dawson said by email.
But Facebook and Snap could both benefit by returning to a focus on producing innovative products, said Won, the founder of Hyperstop.
"You have to bring out an insecurity that another company has and other companies are mimicking," Won explained. "You have to create or you die."
Editors' pick: Originally published March 20.