Facebook Is Ramping Efforts to Challenge Musical.ly

Anytime a new social media trend starts to gain traction, Facebook (NASDAQ: FB) wants a piece of the action. Sometimes, being a fast follower works with incredible success, like copying the Stories format that Snap pioneered. Other times, the fads fade, like anonymous teen polling. One of the social networking juggernaut's more recent fixations is Musical.ly, a burgeoning social media platform where users -- predominantly teens -- can share short lip-syncing videos.

In June, Facebook introduced Lip Sync Live, a new feature available as part of its live video push, but the company appears to have more ideas up its sleeve.

Brought to you by licensing deals with record labels

TechCrunch reports that Facebook is working on a new "Talent Show" feature that would let users choose from a library of popular songs and then compete with other Facebook users by performing those songs. Researcher Jane Manchun Wong discovered details of the forthcoming feature in Facebook's app code, and subsequently shared her findings.

Facebook worked for years to secure licensing deals with the major record labels, giving the company the rights to host user-generated content that may contain copyrighted music. The company scored those deals in December (Universal), January (Sony/ATV), and March (Warner). Facebook is wasting no time putting those deals to use.

Facebook copies what it can't buy

The news is the latest evidence that Facebook is ramping its efforts to challenge Musical.ly, which has an estimated 200 million registered users and 66 million monthly active users (MAUs). Musical.ly was on shaky financial footing for a while. The start-up had inked its licensing deals with record labels years ago, shortly after closing a funding round.

But royalty costs are expensive, and ad revenue has been slow to get off the ground. Musical.ly's ad prices were a bit too aggressive, according to Digiday, putting off advertising customers. China-based Bytedance acquired Musical.ly last November for an estimated $1 billion, which should alleviate some of -- but not all of -- the monetization pressure.

Seeing as how Musical.ly was just acquired less than a year ago, that makes it unlikely that Facebook could acquire the growing start-up, even if it wanted to. As we've seen in Facebook's past, when an acquisition isn't possible for whatever reason, it will instead look to replicate the popular feature or format and deploy it to its massive global user base of over 2.2 billion MAUs. However, Facebook's track record in actually beating smaller rivals is mixed.

It's clear that Facebook wants to challenge Musical.ly, but what's less clear is whether or not it will succeed.

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Evan Niu, CFA owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.