Main menu


Snapchat survived Facebook. But can it beat Apple and TikTok?

featured image

While Facebook, YouTube, and Twitter make headlines and testify before Congress, Snapchat has quietly established itself as the favorite social media app for teens over the past decade. Five years ago, Facebook’s Instagram was left for dead by several analysts when it copied Stories, its signature photo disappearing feature. feature.

until now. A sluggish economy, dramatic shifts in the digital advertising market, and the rapid rise of TikTok have left Snap in financial trouble, laying off his 20% of its workforce on August 31st. CEO Evan Spiegel’s internal memo, first obtained by The Verge and seen by The Post on Wednesday, acknowledges that the company is falling significantly short of its 2022 organic growth targets. Almost three quarters of its value.

No longer a thriving upstart in the social media world, Snap faces new challenges in the 2000s. How to build a mature, profitable business around an app that continues to be loved by teens and largely ignored by seniors with disposable income. The company, known for its optimistic culture and whimsical product initiatives, has prided itself on being anti-Facebook, as it struggles to capitalize on its young eyeballs amid threats to its revenue model. , stripped of its ambition and cracking down on its employees. From Apple and TikTok.

“I think it’s the perfect storm,” said Dan Ives, an analyst at financial services firm Wedbush Securities. TikTok is encroaching on his Snap demographic, online advertisers are spending less, and his Apple move to limit the data apps can collect from his iPhone users “has a huge impact on the business model. It hit me,” he said. Snap has always struggled to turn its popularity into profit, but thanks to “massive headwinds” in the digital advertising market, that’s getting harder.

It leads to a dizzying reversal of fortunes for a quietly thriving company. Following a failed 2018 redesign that sent influential celebrities such as Kylie Jenner to rival Instagram, Snapchat has overhauled its previously buggy Android app, improved advertiser tools and It has regained its footing thanks to increased interest in social media during the pandemic lockdown.

In a statement, Snap’s head of communications, Julie Henderson, said the company’s layoffs and share price decline were due to a “challenging macro environment,” adding users and revenue faster than many of its rivals. I said yes. While Snap is “fundamentally strong,” she said, “we had to make some tough decisions to best position the business for the future.”

Rapidly cut 20% of staff as ad sales continue to dry up

As Instagram’s user base ages and grows, and its algorithmic feed caters to influencers, Snapchat has become a place for teens to communicate privately and spontaneously, out of the sight of parents and teachers. It has cemented its reputation among young people. Kids can use Snap Maps to share their location, arrange impromptu parties, and share Snapchat streaks with their best friends. ) relentlessly track. Snap has also struck key strategic partnerships to integrate its technology and his AR capabilities with companies like his dating app Bumble, Ticketmaster and Disney.

Snap dodged many of the content moderation scandals that rocked Facebook and other rivals, avoiding algorithmic recommendations in favor of editorial oversight of content highlighted in the app. We worked hard on features aimed at making messaging more fun, such as digital filters that let you look like a baby or an animal, or swap facial features with friends. It has its own controversy.)

Snapchat’s active user base surges to 350 million per day, is more than Twitter, Pinterest, Reddit. By 2022, it will be the fifth largest US-based social media platform by active users, behind Meta’s Facebook, Instagram, WhatsApp and Google’s YouTube. His April survey by Pew Research found that 59% of his teens in America use Snapchat, with 15% saying they use it “almost constantly.”

And the future looked bright. In April, Snap reported that it was still adding millions of users despite Facebook’s slowing growth. It achieved a quarterly profit for the first time in his five-year history as a public company.

In the winning mood at its annual developer conference, the company flew a $230 “selfie drone” called the Pixy. The drone continues the tradition of surprising hardware announcements by taking photos and videos and posting them to his Snapchat.

Spiegel touted its vision of augmented reality (AR) as the future of consumer technology, in sharp contrast to Meta CEO Mark Zuckerberg’s vision of the virtual reality “Metaverse.” Rather than wearing headsets to escape the world, Snap foresaw people slipping on circular augmented reality glasses that superimpose digital images, called lenses, onto their view of the world around them.

Facebook abandons friends and family to compete with TikTok

Snap, meanwhile, continued to invest in its quirky empire of experimental projects and products. From an in-house startup accelerator to a mobile gaming business, a series of original short video shows, and a lofty magazine of ideas. technology and society.

Fast forward three months and the frenzy has died down, thanks to a dismal earnings report and the first mass layoffs in the company’s history. The company has cut about 1,300 jobs from his more than 5,000 employees, including the entire team, and halted acquisitions such as the standalone social his maps app Zenly.

What about startup accelerators, game businesses, original shows, tech magazines? All shutters. Pixy Drone: Discontinued.

Among the rest of the company’s ranks, felt sick, According to current and former employees.

“Morale is very low,” said a Snap employee who spoke on condition of anonymity to discuss company issues. references to the merciless use of performance indicators), and concerns about the decline of its “kind” culture. (In August, Snap promoted former Amazon senior vice president Jerry Hunter to chief operating officer.)

“People are definitely not optimistic” about Snapchat’s future, said the employee. They noted that some colleagues were upset that the layoffs included people on parental leave and employees who have played a key role in the company’s diversity efforts.

Snapchat Sexually Exploited Teenage Girl Challenges America’s Tech

The biggest factor, according to the company, is the withdrawal of digital advertisers due to concerns over the Ukraine war, inflation and recession, a situation that has also affected Snapchat’s rivals. In fact, Facebook and Twitter have also tightened regulation as revenues have flattened in recent months, with Google CEO Sundar Pichai saying at a conference this week that he could cut his business by 20%. He said he wants to be efficient.

But it’s Snap’s stock price that’s been hit hardest, and some analysts believe Snap’s challenges are more difficult than just a recession. One of the big threats is the surprising rise of TikTok, a Chinese-owned video app that started in the US in 2018. Youtube.

TikTok and Snapchat don’t serve the same function, but they’re competing for the same young people’s time and stealing revenue from the same advertisers targeting that demographic, said Wedbush analyst Ives. increase. Nearly half of his Snapchat users in the US are under the age of 25, according to analytics firm Insider Intelligence, despite the company’s years-long efforts to spread the appeal of Snapchat.

Some of the advertising headwinds are straight down Route 101 from Apple’s headquarters in Cupertino.

Last year, Apple imposed new privacy rules on app makers like Facebook and Snapchat, limiting their ability to collect data about users for targeted advertising purposes. App makers had to explicitly ask users if they wanted to track their Internet activity.A request many users declined. These changes have caused Snap and other tech companies to repeatedly warn investors that the changes will affect their bottom line.

Snap’s management has touted investments in new analytics tools for advertisers, but the company is increasingly looking for other ways to make money.

Apple makes privacy changes, Facebook and ad companies yell foul

This includes e-commerce, which lets retailers sell products within the Snapchat app and allows users to virtually “try on” cosmetics, clothing, and other items via augmented reality; It includes a new subscription business called Snapchat+. For $3.99 per month, subscribers get special badges and features within the app, where replies to celebrities appear above replies from non-subscribers.

By August, Snap said it had reached 1 million Snapchat+ users. Spiegel’s internal memo says he’s aiming for 4 million by the end of the year and 10 million by next year. He also said the company continues to look beyond Zoomers to expand its user base to millennials now in their 30s and into his 40s.

Meanwhile, Snapchat is following Instagram in trying its own TikTok-like video feature called Spotlight. This is a reversal at risk of reputational damage for a company that has long prided itself on being a company that develops innovations that others imitate.

In a TV interview with CNBC this week, Spiegel said he believes the ad business will eventually bounce back, but the company needs to “refocus on the business” and show it can turn a profit in the meantime. “Innovation, as you know, is about taking risks. Sometimes that means actually integrating things that you think are working, like augmented reality,” he said. I was.

But Snap’s massive layoffs and closure of its experimental initiative risk sacrificing some of its long-term growth potential, said Mark Shumlich, head of U.S. Internet companies at Bernstein. Stated.

“I feel like they probably took the machete where a paring knife would have sufficed,” Shmulik said.

On the bright side, he added, Snap has proven in the past that it can overcome adversity and reinvent itself.

“They are now facing another one of those things, which we call the ‘existential moment,’ where you see them taking another turn,” Shmulik said. says. “Every time they go through it, there’s always a new threat or dynamic change on the horizon, but somehow they endure.”