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1 Big Sign Facebook's TikTok Clone Is Succeeding

Facebook's (NASDAQ: FB) efforts to take on TikTok have changed substantially over the last few weeks. Earlier this month, it shut down Lasso, its stand-alone app that aimed to copy the mechanics of TikTok. Then it expanded the Instagram Reels feature to India just a few weeks after introducing it to users in Germany and France. Reels originally launched last November in Brazil.

Reels will soon launch in 50 more countries, including the United States, according to a report from NBC News. A spokesperson later confirmed the report. The forthcoming move is a sign Instagram is seeing strong traction in its new markets, and it could mean it's ready to scale the feature quickly. Management may also see an opportunity: TikTok has faced increased regulatory scrutiny in recent weeks, including a ban in India.

Facebook has a unique ability to scale products and features quickly when users start to show interest. That could make Reels a massive driver of engagement while stemming TikTok's growing threat to its advertising business.

Mark Zuckerberg on stage

Image source: Facebook.

Beating back the smaller competition and taking on TikTok

Last year, Facebook CEO Mark Zuckerberg said it'll test its TikTok competitors in markets where TikTok doesn't have a large presence. Once it gets the feature to work, increasing engagement in those markets, it'll try to take on TikTok in its stronger markets.

After India banned TikTok and 58 other Chinese apps, Facebook was quick to seize the opportunity to test out Reels in a massive market already familiar with the TikTok format. But it wasn't the only company looking to capture the attention of the 200 million former TikTok users in India. Roposo, a Bangalore-based TikTok rival, said it was adding as many as 500,000 new users an hour at its peak after the TikTok ban.

By rolling Reels into Instagram, Facebook has an advantage over most other competitors still trying to establish a user base, and that advantage appears to be proving its value. While Facebook hasn't commented or released any engagement data about Reels, the move to expand to markets where TikTok is doing well suggests it's seeing good results in Brazil, Germany, France, and India.

Now that Facebook's found a product that works (as well as what doesn't), it can put more effort into taking on TikTok directly. And Facebook is very good at scaling products when it sees good engagement in a small group.

The next Stories?

Instagram launched Stories in the summer of 2016. By the end of the year, it had 150 million daily users and started selling advertisements. It had a noticeable impact on Snap (NYSE: SNAP), which was preparing an IPO at the time.

While Snapchat had about 65 million daily active users in North America and over 150 million users worldwide when Instagram Stories launched, Facebook quickly caught up and surpassed Snap's app. For reference, TikTok has about 30 million active users in the U.S. right now (but a much larger global user base).

One of the keys to Stories' success was the premier placement in the Instagram app. While Reels likely won't see placement above users' feeds on the Instagram homepage, the feature will get its own dedicated section and tab. And Instagram can direct users to Reels through the feed, Stories, and Explore. With over 1 billion monthly active users (more than twice as many as it had when it launched Stories), Reels could see a lot of new users in the coming months. If it continues to gain traction, it could be the next source of revenue growth for the FAANG stock.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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