Snap Inc. CEO Evan Spiegel shared a long memo with employees Sept. 26 in which he outlined several goals, including full-year profitability in 2019.
The memo was obtained and shared by Alex Heath of Cheddar.
Growth and profitability
Spiegel said Snap Inc. will grow revenue three different ways: by increasing daily users and engagement; by improving measurement and optimization; and by boosting total active advertisers.
He added that growing daily users in “highly monetizable markets” like the U.S., U.K. and France will advance this goal in the short term, while looking further out, average revenue per user can be correlated with market penetration, and he said most incremental growth in those core markets will have to come from older users who generate higher ARPU.
Spiegel wrote, “Many older users today see Snapchat as frivolous or a waste of time because they think Snapchat is social media rather than a faster way to communicate. Changing the design language of our product and improving our marketing and communications around Snapchat will help users understand our value.”
He also addressed the issue of growing Snapchat’s user base in developing markets such as India, Indonesia, Mexico, Brazil and the Philippines, saying that the company must solve problems that are blocking people in those markets from accessing its services and adding, “The opportunity in terms of incremental user growth is enormous because these countries have very large, youthful populations. While serving these users will be an investment in the short term, adding users in these geographies helps us to deepen our moat.”
Spiegel also pointed to the age divide when discussing the client said, saying that “aging up” its community will also help the media, advertisers and Wall Street better understand Snapchat and adding, “A new challenge for our sales and marketing teams is to make every client a Snapchatter. In the past, we’ve tried to make presentations or videos to explain Snapchat to advertisers. This year, we are going to spend less time explaining and more time helping advertisers learn by using our product. This challenge extends to anyone at Snap that interfaces with our partners, the media or Wall Street. Rather than trying to explain everything, let’s help people use the product themselves.”
He touted Snap’s first-party measurement, saying that it helps advertisers better understand return on investment and improve the relevance and optimization of their campaigns to drive revenue while improving the user experience, adding that swipes was the only optimization goal when Snapchat debuted its self-serve advertising tool last year, and since then, metrics such as video views, site visits and application installs have been added to the mix.
Spiegel wrote, “This year, we will be investing more in our fully self-serve business, focused on the top 100,000 digital advertisers, to help them learn how to achieve their business objectives on Snapchat and drive measurable ROI. This means finding new ways to reach those advertisers and making it easier for them to get started with our Ad Manager.”
The ill-fated redesign
Spiegel addressed Snapchat’s controversial redesign last year, in which it shifted to an algorithm that separated Discover content from friends’ posts, as well its reversal of that redesign in May and its return to chronological order.
He wrote, “We rushed our redesign, solving one problem but creating many others … By launching our redesign quickly and separating social from media, we got ahead of the existential crisis faced by many platforms today. We led the way in our industry by curating broadcast content and separating friends from professional content creators. Unfortunately, we didn’t give ourselves enough time to continue iterating and testing the redesign with a smaller percentage of our community. As a result, we had to continue our iterations after we launched, causing a lot of frustration for our community.”
Spiegel said the biggest error with the redesign was straying from Snap’s “core product value” of being the fastest way to communicate, admitting that the algorithmic feed made it harder for users to find the people and brands they wanted to interact with.
He also addressed its effects on the influencer marketing community, writing, “We expected influencers to be upset because we moved their Stories below the ones from our real friends. Influencers went from being at the top of the list on Snapchat to somewhere in the middle. We are willing to accept the trade-off for the long-term benefits of putting friends first. Regrettably, we didn’t understand at the time that the biggest problem with our redesign wasn’t the frustration from influencers—it was the frustration from members of our community who felt like it was harder to communicate.”
Shows and Publisher Stories
Spiegel wrote that 18 shows on Snapchat reach more than 10 million unique viewers per month, and 12 of those are original productions.
He added that Snapchat’s audience for its Publisher Stories is up 20 percent year-over-year, and he sees more opportunity for growth.
The need for speed
Returning to the aforementioned core product value of making Snapchat the fastest way for people to communicate, Spiegel wrote, “Recently, I had the opportunity to use Snapchat v5.0 on an iPhone 4. It had much of [co-founder and chief technology officer Bobby Murphy‘s] original code and many of my original graphics. It was way faster than the current version of Snapchat running on my iPhone X. In our excitement to innovate and bring many new products into the world, we have lost the core of what made Snapchat the fastest way to communicate.”
He promised to refocus on speed, writing, “This will require us to change the way that we work and put our core product value of being the fastest way to communicate at the forefront of everything we do at Snap. It might require us to change our products for different markets where some of our value-add features detract from our core product value.”
Spiegel said a typical Snapchat user’s top friend in a given week accounts for 25 percent of send volume on the app, adding that by the time the top 18 friends are analyzed, each incremental friend is down to contributing less than 1 percent of total send volume.
He wrote, “This means that in order to grow our business, we need to make sure that we help all Snapchatters communicate with their best friends. 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. We can’t establish network effects if our users can’t use Snap to communicate, so we need to work hard to make sure that all Snapchatters have best friends they can communicate with.”