October 9, 2018
In a 15-page letter on September 26, Snap chief executive Evan Spiegel told employees his plan to achieve full-year profitability in 2019 and refocus the company around new strategies. He admitted that the company’s redesign created many problems and “lost the core of what made Snapchat the fastest way to communicate.” That widely criticized redesign led to Snapchat’s first-ever decline in daily active users last quarter. Spiegel now wants the company to focus on adults, not teens, and messaging, not stories.
Cheddar reports that, after a Wall Street analyst stated that Facebook’s Instagram is “irreversibly reducing” Snap’s ability to meet shareholder expectations, the company’s stock dipped below $8 for the first time. Spielgel’s goal, revealed in the memo, is to break even in Q4 this year and reach “full year profitability” in 2019.
Last quarter, Snap, which has about $1.5 billion in available cash, mostly raised in its IPO in early 2017, lost around $250 million. Meanwhile, Spiegel had the highest pay package of any U.S. chief executive in 2017, “thanks to a stock grant awarded to him for taking the company public.”
Spiegel also revealed his thoughts on why the redesign (internally known as “Cheetah”) went wrong and what he thinks of the competition. He also describes Snap’s new designs for the Snapchat Discover section, “which shows content from professional media companies and celebrities.” He doesn’t mention “the many senior executives who have either left or announced their intention to leave in the last 18 months, including the chief strategy officer, senior vice president of engineering, chief financial officer, vice president of product, vice president of sales, general counsel, chief security officer, vice president of hardware, and vice president of communications.”
TechCrunch reports that Spiegel seems to realize that he won’t be able to position Snapchat ahead of Instagram, but is satisfied if it can “help us express ourselves while finally reaching even meager profitability.”
Other takeaways from the memo: “Snapchat must beat Facebook at best friends.” A user’s top friend contributes 25 percent of Snap send volume. “Finding best friends is a different problem than finding more friends, so we need to think about new ways to help people find the friends they care most about.” Snap’s 18 Shows are now reaching monthly audiences of over 10 million unique viewers and have almost tripled in the amount of time viewers are engaged. “We believe there is a significant opportunity to continue growing the number of people who engage with Discover content, [and] we are also working to identify content that is performing well outside of Snapchat so that we can bring it into Discover.”
Snap sees growth in “older users who generate higher average revenue per user,” which requires a maturation of the application; the content team is experimenting with new layouts and content types for Discover. The company is also prioritizing developing markets and “building software that takes the millions of Snaps submitted to Our Story and reconstructs parts of the world in 3D.”