It was January 2016, and MSQRD was the hottest new app in town.
The buzzy new app let users apply augmented-reality filters to their faces — then an exciting new development in social media, though now commonplace in apps like Instagram and Snapchat — and it skyrocketed to the top of the iOS App Store.
Then Facebook bought it. At the time of the acquisition, Facebook promised it would keep MSQRD updated and viable as a standalone service. That didn’t happen, at least not in any meaningful way.
Within months, the app had plummeted down the app-store rankings, users abandoned it, and software updates and new filters quickly stopped arriving.
It’s not clear if Facebook has any intentions for MSQRD going forward or if it plans to one day discontinue it. A spokesperson did not respond to Business Insider’s request for comment.
Meanwhile, Facebook integrated the startup’s tech into its own products, turbocharging its augmented-reality-camera efforts as it sought to take on the threat of Snapchat.
Business Insider revisited the rise and fall of MSQRD to examine how Facebook has used acquisitions to bolster its dominance over the past few years, with the help of new data that shows exactly how fast MSQRD dropped off the radar after its acquisition.
Data from the app-research firm Apptopia shows that at MSQRD’s peak, it was one of the most popular apps in the iOS and Android app stores. But within weeks of the acquisition, in March 2016, it began to fall in the rankings. By June, it was no longer popular enough to appear in Google Play’s ranking of top apps, and it hit a similar threshold in Apple’s App Store about a year and a half after it was first acquired.
Similarly, the app’s monthly active users spiked shortly after the acquisition to more than 40 million across iOS and Android combined before rapidly declining over the subsequent months and years. As of October, the app had only about 1 million monthly active users, according to Apptopia estimates.
At the time of the acquisition, MSQRD had said that the app would continue to be updated even as its tech was integrated into Facebook’s own apps.
“Within Facebook, we’re going to be able to reach people at a scale like never before. For starters, we’ll be able to bring our technology to Facebook’s audience of nearly 1.6 billion people. This is a scale of audience we never imagined was possible,” CEO Eugene Nevgen wrote in a blog post announcing the sale.
“While we will be partnering with Facebook to integrate our technology, the app will stay up and running so you’ll continue to record fun selfies and keep using the product. You can also expect us to keep adding fun features,” he added.
However, the Android app’s last update was in August 2016 — five months after the acquisition — while the iOS app was last updated in December 2016.
Facebook’s acquisition strategy is under scrutiny
Facebook, alongside other major tech companies, is now facing an unprecedented wave of scrutiny over its history of acquisitions and dominance of the social-media ecosystem.
The Federal Trade Commission has launched an antitrust probe into the $589 billion company and has been contacting some founders of apps that Facebook has acquired over the years. There’s also a growing chorus of political figures and critics calling for the company to be broken up on antitrust grounds, notably US Democratic presidential hopeful Sen. Elizabeth Warren.
Facebook’s actions with MSQRD appear to have bolstered Facebook’s own in-house apps even as it effectively decreased consumer choice by neglecting MSQRD — but it’s difficult to say if this action harmed consumers.
Florian Ederer, an associated professor of economics at the Yale School of Management, said the acquisition led to a “consumer surplus” because “when Facebook integrated the technology in its existing products, it immediately gave millions of Messenger/Instagram users integrated and easy access to the technology — users that MSQRD may not have reached because they didn’t know about it or didn’t like that they had to use a standalone app.”
On the flipside, though, it may have reduced competition in the sector: “Having a competing technology like MSQRD’s could have spurred Facebook to innovate internally and to produce a superior product. But it’s hard to tell because we never observed this counterfactual case. Furthermore, even though Facebook abandoned the standalone MSQRD product, it’s possible that Facebook continued to improve the technology that it integrated in Messenger/Instagram,” Ederer said.
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