Mark Zuckerberg’s Facebook has recently been testing a new app named Hotline which is a Q&A app similar to that of Clubhouse.
Clubhouse is a social networking app that has a very strong sense of exclusivity as members have to be invited by existing members, thus the app has some sort of a niche in the social networking market.
Members are also able to choose their interests so that they receive content that is related to what they want, additionally, the app allows users to tune into content such as interviews and discussions, similar to that of a podcast.
Users can also hold virtual conversation rooms where they have to “raise their hand” to speak.
Clubhouse has been valued at $4bn and because of this success, Facebook has taken an interest in the niche market which the app has managed to fulfil.
Because of this, Facebook’s recent development of Hotline is an attack on this market which Clubhouse has control of, but, Facebook seems to have the upper hand on this offensive as they offer some additional perks.
Facebook’s Hotline offers video call, a feature which Clubhouse currently does not have, and this improvement may allow Facebook to steal some of Clubhouse’s market share.
Additionally, Hotlines users will likely have the added benefits of being somewhat linked to Facebook, which, because of the companies extensive big data and cookies on its consumers, will enable the user to have a more personal experience.
However, this “benefit” may also be a double-edged sword as many dislike the amount of data which Facebook collects, and, once it is considered that Clubhouse was used by some Chinese individuals to evade the freedom of speech laws in China, the idea of Zuckerberg collecting data may not sit well with consumers.
Nevertheless, the decision to create a new app that is specifically catered towards disrupting or entering a new market is a common strategy that is frequently done by social media giants, especially Facebook.
In the past, instead of entering the market, Facebook has straight-up bought social media platforms such as Whatsapp, however, Facebooks growing portfolio of platforms has been noted by the United States Government.
Because of this, Facebook has to be careful with its decisions in regards to buying competitors as the more they own, the more evidence there is towards them being a monopoly.
So, instead, Facebook has taken the approach of developing a new application in an attempt to decrease the suspicion of the American government.
But, due to Facebook’s current power and deep pockets, the development of a new product to rival Clubhouse has little risk relative to the firms resources.
This is because Facebook already has specialists and the funds necessary to develop a product, thus making the barriers to entry meaningless, and, this expertise likely has the potential of placing a significant dent in Clubhouse’s market share and consequently making Facebook a nice amount of money.
However, it does seem that due to Clubhouse’s exclusivity, members may feel a strong sense of brand loyalty towards the app, meaning that Facebook’s efforts of breaking into a new market may be in vain, nevertheless, Facebook’s decision is a perfect example of their ability and willingness to enter markets in an attempt to destroy competition.
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