The New Copycats: How Facebook Squashes Competition From Startups

Mr. Zuckerberg is sensitive to anything that might disrupt Facebook, even the teeniest startup, say current and former executives and employees.

Facebook uses an internal database to track rivals, including young startups performing unusually well, people familiar with the system say. The database stems from Facebook’s 2013 acquisition of a Tel Aviv-based startup, Onavo, which had built an app that secures users’ privacy by routing their traffic through private servers. The app gives Facebook an unusually detailed look at what users collectively do on their phones, these people say.

The tool shaped Facebook’s decision to buy WhatsApp and informed its live-video strategy, they say. Facebook used Onavo to build its early-bird tool that tips it off to promising services and that helped Facebook home in on Houseparty.

.. Mr. Rubin didn’t want to sell but was under pressure from his board to keep Houseparty’s options open, Mr. Elman says. “If a company like Facebook or Snapchat needs your team’s expertise, that might be a better return for shareholders than the risk of going big,” Mr. Elman says he told Mr. Rubin.

.. In December, Facebook began its group-video-chat offensive. Its Messenger app introduced the feature with the ability to see up to six people in a conversation, compared with the eight-person rooms on Houseparty.

In February, Facebook invited Houseparty users between the ages of 13 and 17 to come to its offices in Menlo Park, Calif., to participate in a study and keep a diary for a week afterward that they would share with Facebook, offering as an inducement $275 Amazon gift cards.

.. Last month, it recruited a vice president of engineering, Kinshuk Mishra, who had helped Spotify AB, the music-streaming service, fend off Apple Music. It introduced a new chat feature called “passing notes” to attract more users.