Why Facebook Killed A Trio Of Once-Promising Apps

Facebook's (NASDAQ:FB) acquisition of Instagram for $1 billion in 2012 turned out to be one of the company's wisest investments. At the time, many critics wondered why Facebook would pay that much for an app for creating and sharing filtered photos. But between Jan. 2013 and this June, Instagram's monthly active users (MAUs) surged from 90 million to 1 billion.

This article originally appeared in The Motley Fool.

Instagram's growth with teens offset its slumping popularity with younger users, and it became a valuable secondary advertising platform. Bloomberg Intelligence recently estimated that the app was now worth $100 billion, representing a hundredfold return on Facebook's original investment.

Facebook, in its eagerness to find the next Instagram, acquired and developed a lot of apps in recent years. The only real success was WhatsApp, which it acquired for nearly $22 billion in 2014. Yet there were plenty of losers — including its Snapchat clone Lifestage, its Groupon rival Deals, and its virtual assistant M.

Facebook recently tossed three more once-promising apps into that digital dumpster: its Android dialer Hello, its fitness app Moves, and its anonymized teen app Tbh. Let's examine what each of these failures mean for Facebook's future.

Goodbye, Hello

Facebook introduced Hello in 2015. The app replaced the default dialer on Android phones with a new caller ID app, which blocked unwanted calls and helped users search for people and businesses by pulling data from Facebook's social network.

Hello displayed additional Facebook data about callers, even if a contact wasn't saved on a user's phone. It also let users block specific numbers by sending their calls directly to voice mail, and promoted the use of free calls over Wi-Fi connections.

Hello was clearly an attempt by Facebook to wedge itself into Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Android mobile ecosystem. In theory, Hello could pull business searches away from Google Maps and disrupt the seamless connection between Maps and the Android dialer. In reality, most users didn't think it was necessary to install a Facebook-powered dialer.

Facebook's previous attempt to disrupt Android, Facebook Home, flopped for similar reasons. With Home, Facebook replaced the default Android launcher with its own custom skin integrated with Facebook features, but it was considered a cumbersome and unnecessary app. Facebook abandoned Home less than a year after its launch in 2013.

All out of Moves

Facebook acquired the Moves fitness app in 2014. It seemed like a smart purchase at the time, since surging demand for Fitbit (NYSE:FIT) devices had sparked a land grab in the wearables market. Move tracked a user's location, recorded different movements (like walking, running, and cycling) between locations, and logged the number of steps taken. The app had scored about 40 million downloads at the time of Facebook's buyout.

But two months after Facebook bought Moves, Google unveiled Google Fit — a more comprehensive fitness app that was integrated with Maps and third-party apps. Fitbit also subsequently added more advanced features to its core app that let users track different types of workouts, log their food and calorie counts, and participate in social challenges. Apple followed suit with its Health app later that year.

Meanwhile, demand for fitness trackers started peaking. Fitbit's revenue soared 149% in 2015, but slowed to 17% growth in 2016, then tumbled 26% in 2017. Since even market leaders like Fitbit were struggling to grow, it seemed pointless for Facebook to keep supporting a fitness app for a saturated and fragmented market.

Tbh, it's tough to keep teens engaged

Facebook acquired Tbh last October, just over two months after the start-up was founded. Tbh was an anonymized polling app designed for teens. Users could poll each other with multiple-choice questions like "Which person has the most integrity?" or "Which person has the best smile?" Tbh required the questions to be "uplifting" and "not offensive to any group."

Whenever a user gets picked, he or she earns anonymous gems (a pink gem from a girl, and a blue gem from a boy), which can be redeemed for extra features. Tbh was downloaded five million times in its first nine weeks, and racked up 2.5 million daily active users. Facebook, which likely saw Tbh as another way it could offset its loss of teen users, was eager to purchase the app.

Unfortunately, Tbh's initial growth spurt didn't turn it into the next Snapchat. Facebook didn't unveil any more user numbers for Tbh, but its polls likely failed to engage teens like Snapchat's ephemeral messages or Instagram's filtered photos and videos.

The key takeaways

The failures of Hello, Moves, and Tbh won't impact Facebook's finances in a meaningful way. However, they represent failed efforts to disrupt industries dominated by Google, Fitbit, and Snap (NYSE:SNAP), and reveal its insecurities about the ever-evolving mobile market.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Facebook, and Fitbit. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.