Facebook’s global head of sales, Carolyn Everson, revealed on CNBC this week that Instagram Stories now boasts 250 million daily active users. That number means Instagram Stories is crushing Snapchat Stories, the feature it directly copied, which has 160 million daily active users. Instagram Stories first surpassed Snapchat Stories in April, just four months after it launched, and now, six months after launch, it has extended its lead.
That’s bad news for other small tech startups—even those that aren’t direct competitors to Snapchat and Instagram. It’s proof that big, powerful tech giants like Facebook can copy a hot feature or broad strategy from a small competitor and quickly scale and outdo them thanks to their massive built-in user base. Google did it to its search predecessors. Google and Apple have been doing it to each other in smartphones for years. Amazon did it to brick-and-mortar bookstores.
“Copied and crushed,” as Ted Livingston, CEO of Kik Messenger, puts it. Copied and crushed, indeed. And Kik, an early text messaging app that amassed 300 million users, desperately wants to avoid being the next victim. So it’s turning… to cryptocurrency.
“These big companies are increasingly monopolizing digital services,” says Livingston. “It’s getting harder and harder to compete. We’re seeing this consolidation into just a few big, bland services. Even if you’re Snapchat… you’re saying, ‘What are we going to do?’”
Livingston blames a gap in monetization ability as the biggest factor. Entrenched, powerful tech giants like Google and Facebook are the only ones who have a size that allows them to sell ads on their platforms while keeping their core services free to users. Smaller players are stuck with a dilemma: plaster their app in ads that might alienate new users when they’re still in growth mode, or don’t sell ads and scratch your head over how to bring in revenue.
Hence: cryptocurrency. Kik plans an ICO (initial coin offering) in which it will sell a supply of its own digital token, kin, in exchange for ether, the token of the blockchain network Ethereum.
An alternative to venture fundraising
In an ICO, a company launches an open sale of its own coin or token in exchange for an existing cryptocurrency. You could buy 100 kin coins and pay in bitcoin or in ether.
It is a high risk strategy, but it is the hottest new workaround for tech startups to raise capital instantly without having to do a new venture funding round. (Indeed, Kik has already raised quite a lot of venture funding the traditional way: $120 million to date, including $50 million in 2015 from Chinese tech giant Tencent; Kik is a billion-dollar-valued “unicorn.”)