Pinterest shares tumbled 5% on Thursday and another 1% on Friday after Facebook introduced a new app called Hobbi that lets users create photo collections for their projects and interests.
While Hobbi isn’t exactly a Pinterest copycat, the existence of the stealthily-launched app, which was first reported by The Information, was enough to spook investors in the short term.
“Facebook has 2.5 billion users. Anytime they roll anything out, there’s a lot of power behind that user base,” Ygal Arounian, an analyst at Wedbush Securities, told Coins2Day. “If it’s a compelling product, just because they have that base built-in, there is a risk [for investors].”
The app was built by Facebook’s New Product Experimentation (NPE) Team and was listed under the NPE brand name—not Facebook—in the App Store. The group, which premiered in July, is tasked with building new consumer-focused apps. If apps don’t catch on, the team is supposed to shut them down quickly and move on to the next big idea, according to Facebook.
Since last year, NPE has launched Bump, an app for making friends through conversations, and Aux, a social music listening app. Both apps are not currently in the U.S. App Store. A meme editing app, called Whale, has already shut down.
Facebook declined to comment about Hobbi or its plans for it. In a statement, a Pinterest spokesperson downplayed the similarities.
“Upon first look, Hobbi appears to be a photo saving app that lacks the discoverability, search, and recommendations of Pinterest. As described in the App Store, it’s meant to help you document and remember the things you do, which is about the past, while Pinterest is about discovering ideas and inspiring action for the future,” the spokesperson said.
The statement, however, acknowledged that any similarities in other apps only validate the work Pinterest is doing to build community around a visual search engine.
“As we see companies try to copy elements of Pinterest, it validates the importance of a personal place online to explore your own interests, something we’ve been working on since the beginning,” the spokesperson said.
Hobbi shouldn’t be a “major concern” to Pinterest investors, according to Arounian.
“It’s a separate app, so it makes it harder to build up that user base. It doesn’t automatically have 2.5 billion potential users the same way Facebook Dating does,” he said, referring to how Facebook Dating is a part of a of Facebook app. “However, they could always roll it back into the app.”
Even still, shares of Pinterest fell another 1.4% on Friday, marking what has become a familiar pattern when Facebook appears to step on the turf of a rival.
No company perhaps has felt that pain more than Snap. Facebook-owned Instagram integrated Snapchat-style stories into its app in August 2016. Instagram co-founder Kevin Systrom told TechCrunch at the time that Snapchat deserved “all the credit.”
By April 2017, Instagram Stories surpassed Snapchat in users and has continued to grow. As Instagram announced major milestones with stories, Snapchat’s stock took a hit on the news.
While Snap went through a difficult two years, the company had a stellar 2019, adding 31 million new daily active users, and is cruising into 2020 with momentum.
Snap’s shares surged 196% in 2019, according to data from S&P Global Market Intelligence, and many analysts have rated the stock a “buy”.
When Mark Zuckerberg announced Facebook’s plan to enter the world of online matchmaking in 2018, it sent shares of Match Group spiraling by as much as 20% at one point. Shares of Match and its parent company at the time, IAC, also fell nearly 5% in September when Facebook officially launched its dating service in the United States.
However, Facebook’s bark may be bigger than its bite in this case. Analysts say Facebook Dating hasn’t gained much traction against dating behemoth Match, which counts Match.com, Tinder, and Hinge among its portfolio dating brands.
The bottom line is this: First movers still have an advantage, and it’s not necessarily a company-killer when Facebook introduces a challenger or copies their features, Arounian said.
“Anytime Facebook does something, it bears paying attention to,” Arounian said. However, he said in this case, Pinterest has the first mover advantage, while Hobbi isn’t quite the Pinterest clone it was billed to be in some media reports.
“We don’t see this as a meaningful risk to Pinterest,” he said.
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