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To stop copycats, Snapchat shares itself
Evan Spiegel has finally found a way to fight back against Mark Zuckerberg’s army of clones. For 2.5 years, Snapchat foolishly tried to take the high road versus Facebook, with Spiegel claiming “Our values are hard to copy”. That inaction allowed Zuckerberg to accrue over 1 billion daily Stories users across Instagram, WhatsApp, and Facebook compared to Snapchat’s 186 million total daily users. Meanwhile, the whole tech industry scrambled to build knock-offs of Snap’s vision of an ephemeral, visual future.
But Snapchat’s new strategy is a rallying call for the rest of the social web that’s scared of being squashed beneath Facebook’s boot. It rearranges the adage of “if you can’t beat them, join them” into “to beat them, join us”. As a unified front, Snap’s partners get the infrastructure they need to focus on what differentiates them, while Snapchat gains the reach and entrenchment necessary to weather the war.
Tinder lets you use Snapchat Stories as profile photos
Snapchat’s plan is to let other apps embed the best parts of it rather than building their own half-rate copies.
Why reinvent the wheel of Stories, Bitmoji, and ads when you can reuse the original? A high-ranking Snap executive told me on background that this is indeed the strategy. If it’s going to invent these products, and others want something similar, it’s smarter to enable and partly control the Snapchatification than to try to ignore it. Otherwise, Facebook might be the one to platform-tize what Snap inspired everyone to want.
The “Camera company” corrected course and took back control of its destiny this week at its first ever Snap Partner Summit in its hometown of Los Angeles. Now it’s a camera platform thanks to Snap Kit. Its new Story Kit will implant Snapchat Stories into other apps later this year. They can display a more traditional carousel of your friends’ Stories, or lace them into their app in a custom format. Houseparty’s Stories carousel shares what your buddies are up to outside of the group video chat app. Tinder will let you show off your Snapchat Story alongside your photos to seduce potential matches. But the camera stays inside Snapchat, with new options to share out to these App Stories.
Snap CEO Evan Spiegel presents at the Snap Partner Summit
This is how Snapchat colonizes the native app ecosystem similarly to how Facebook invaded the web with the Like button. Snap’s strong privacy record makes these partners willing to host it where now they might fear that Facebook and its history with Cambridge Analytica could tarnish their brand.
Instead of watching these other apps spin up mini competitors that further fragment the Stories world, Snap saves developers the slow and costly hassle while instantly giving them best-in-class tools to boost their own engagement. Each outpost makes your Snapchat account a little more indispensable, grants its camera new utility, and reminds you to visit again. It’s another reason to stick with Snap rather than straying to other versions of Stories.
If Spiegel knows what’s up, he’ll douse the Story Kit partnerships team with resources so they can sign up as many apps as possible before Facebook can copy this idea too. For now, Snap isn’t injecting ads into App Stories, but it could easily do so and split the cash with its host. This would attract partners, generate revenue, and give Snap’s advertisers more reach.
Houseparty embeds Snapchat Stories
Either way, Snap will score those benefits with its new Ad Kit. Later this year the Snapchat Audience Network will launch allowing partners to host Snap’s full-screen vertical video ads and earn an as-yet-undisclosed revenue share. They won’t have to build up an ad sales force or build an auction and delivery system, but just drop in an SDK to start displaying ads to both Snapchat users and non-users. The company’s message again is that it’s becoming easier to cooperate with Snapchat than copy it.
Snap’s new ad network
Giving its advertisers more reach and reusability for Snap’s somewhat proprietary ad unit format helps Snap address its core challenge: scale. Snap’s 186 million total users can look small in comparison to Instagram, Facebook, or YouTube, especially since that count sank in Q2 and Q3 before stabilzing in Q4 of last year. That makes it tougher for advertisers to justify the chore of spending on Snapchat. Ad Kit and potentially Story Kit give Snap more reach even without user growth.
Added size could tip the cards in Snap’s favor given it’s already popular with an extremely important demographic. Snapchat now reaches 75 percent of 13 to 34-year olds in the US, and 90 percent of 13 to 24-year olds there. It claims to now reach more of that younger age group than Facebook in the most lucrative countries: the US, Canada, UK, France, and Australia.
Facebook has massively neglected this segment. Case in point: Facebook Messenger’s Stickers feature that’s popular with kids has hardly improved since its launch in 2013, which I hear was a fight to get approved internally. Meanwhile, Snapchat keeps growing its lead on virtual identity with Bitmoji. Now Snap will let you put your personalized Bitmoji avatar on your FitBit smart watch face, use them to joke about Venmo purchases, and even represent yourself with one in Snap’s new multiplayer games platform.
Again, Snap wants partners to integrate the real thing rather than try to build some half-assed facsimile of Bitmoji. Surprisingly, Facebook’s Avatars have been mired in development for over a year and Apple’s Memoji can’t escape iMessage and FaceTime yet. That’s why Snapchat would be wise to double-down on trying to make Bitmoji the ubiquitous way to represent yourself without a photograph. Facebook’s lack of design cool and Bitmoji’s massive headstart with this differentiated product is a powerful way for Snap to wedge itself into partnerships.
Snap needs all the help it can get if the underdog is going to carve out a substantial and sustainable piece of social networking. Teaming up was the theme of the rest of the Snap Partner Summit. It’s built ways for Netflix, GoFundMe, VSCO, and Anchor to share stickers and for publishers like the Washington Post to share articles back to Snapchat. It’s got Zynga and ZeptoLab building real-time multiplayer Snap Games that live inside chat and are a clever way of slipping ads into messaging.
Snapchat’s new Scan augmented reality utility platform has signed up Giphy and Photomath as well as former partners Shazam and Amazon to let you squeeze extra interactivity out of your surroundings. And since the physical world is too vast for any one developer to fill with AR experiences, Snap beefed up its Lens Studio platform with new templates and creator profiles so developers add to its warchest of 400,000 special effects. Facebook may be able to clone Snap’s features, but not its developer army.
“If we can show the right Lens in the right moment, we can inspire a whole new world of creativity” says Snap co-founder Bobby Murphy . From partnerships to utilities to toys, all the new announcements drive attention back to Snapchat’s camera. That makes it ripe to become the augmented reality brower of the world.
It all feels like a coming of age moment for Snapchat, punctuated by the glitzy press event where media bigwigs gnoshed on Chinese steak buns and played with AR art installations in West Hollywood.
Spiegel has discovered a method of capitalizing on his penchant for inspiring mobile product design. With this strategy in place and Snap’s reengineered Android app and new languages rolling out now, I believe Snapchat will grow again, at least in terms of deeper engagement if not also total user count. Perhaps it will need a little bit more funding to get it over the hurdle, but I expect it will reach profitability before the end of 2020.
During a pre-event press briefing with a dozen Snap executives including Spiegel and Murphy (that was on ‘background’ so we can’t quote or specify who said what), one Snap higher-up joked that Facebook has been copying it for seven years so it’s started to feel normal. Zuckerberg recently declared he wanted to reorient Facebook around privacy, ephemerality, and messaging — the core tenets of Snapchat. But a Snap leader used some colorful language to describe how they don’t care what Facebook says its philosophy is until it fixes the 2 billion-user product that keeps doing harm.
Subtly throwing shade from the stage, Spiegel concluded that “Our camera lets the natural light from our world penetrate the darkness of the Internet . . . as we use the Internet more and more in our daily lives, we need a way to make it a bit more human.” That apparently means making other apps a bit more Snapchat.
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Snapchat launches Mario Party-style multiplayer games platform
Snap is unlocking a new revenue stream while giving you something to do between chats and Stories. Today Snapchat debuts its Snap Games platform that lets you play real-time, multiplayer games while texting and talking with your friends. The platform is based on Snap’s secret late-2017 acquisition of PrettyGreat, an Australian game studio with talent from HalfBrick (which built Fruit Ninja). That team built Bitmoji Party, a Mario Party-style mini-game fest, to show off the platform that includes five games from developers like Zynga and ZeptoLab. The games are rolling out worldwide on iOS and Android starting today.
To monetize the platform, Snapchat will let users opt in to watching six-second unskippable commercials that reward them with a power up or bonus in-game currency. Snapchat will share revenue from the ads with developers, though it refused to specify the split. It could be a little weird watching ads to more easily beat your friends. But down the line it’s easy to imagine Snapchat selling cosmetic upgrades via in-app purchases akin to Fortnite.
Snap announced the new Snap Games platform at its first-ever press event, the Snap Partner Summit in Los Angeles, where it also announced an augmented reality utility platform called Scan, an ads network and a way to put its Stories in other apps. “We wanted to build something that makes us feel like we’re playing a board game with a family of over a long holiday weekend. Something that makes us feel like we’re sitting with friends, controllers in hand, looking at the same screen,” says Snap’s head of gaming, Will Wu. The Information’s Tom Dotan and Amir Efrati first reported Snap was building a gaming platform and Cheddar’s Alex Heath reported it would end up launching today.
Snap Games could be considered a real-time spin on Facebook Messenger’s Instant Games platform, which has focused on porting to HTML5 well-known asynchronous games like Pac-Man and other arcade titles. Similarly, Snap Games don’t have to be downloaded separately, as they’re piped in from the web. Users can browse available games by tapping a new rocket ship button in the chat bar.
You’re invited to Bitmoji Party
#SnapPartnerSummit pic.twitter.com/WBTntkqZil
— Snapchat (@Snapchat) April 4, 2019
With Bitmoji Party, your avatar competes with up to seven friends simultaneously in a series of mini games where you have to stay balanced on a giant record as a DJ scratches it, or avoid getting knocked in the pool. You also can have another 24 friends spectate and rotate in. Winners earn coins they can use to buy dances to stunt on their competition. And with an ever-present chat bar, users can use text or voice to talk trash.
Rather than port in known IP, Snap recruited developers to build games exclusively for its vertical, real-time multiplayer format. These include:
- Alphabear Hustle from SpryFox – a fast-paced word puzzler
- C.A.T.S. (Crash Arena Turbo Stars) Drift Race from ZeptoLab – a cutesy racing game
- Snake Squad from Game Closure – a reimagining of the classic Snake game set in outer space
- Tiny Royale from Zynga – a top-down battle royale shooter game that feels like a Game Boy version of Fortnite top-down battle royale game
- Zombie Rescue Squad from PikPok – a zombie shooter
Snapchat’s partner games (from left): Tiny Royale, Snake Squad, C.A.T.S. Drift Race
Snap’s game platform has huge potential to boost time spent in the app and the ads views that generates because gaming is perfect for its demographic. “In the United States, Snapchat now reaches nearly 75 percent of all 13 to 34-year-olds, and we reach 90 percent of 13 to 24-year-olds. In fact, we reach more 13 to 24-year-olds than Facebook or Instagram in the United States, the U.K., France, Canada and Australia,” Snap CEO Evan Spiegel revealed today. This is the age group with the free time and dense social graphs to make use of multiplayer real-time games.
The big question is whether Snap’s reward-incentivized video ad views will generate enough cash to keep developers coming to the platform. If not, a limited line of titles could get old quick. Snap has entirely avoided in-app purchases since shutting down its Lens Store in early 2016. There’s understandable concern that kids could rack up huge bills on their parents’ credit cards. But given how Fortnite has normalized paying for no-utility cosmetic upgrades for this same demographic, with the right controls Snapchat could do the same to make itself and its partners a lot more money. And given you’re always playing with your friends, not strangers, there’s an even deeper urge to buy funny costumes and dances to impress them.
Snapchat’s overarching strategy right now is to build an orbit of time-wasters surrounding chat. What began with Stories now includes Discover publications, premium Shows, augmented reality toys and now games. It may never become a favorite with the 35+ age group. But since messaging is the top mobile behavior, Snap can use it to keep people coming back and then distract them while they’re waiting for a reply or need a social alternative to small talk.
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Snapchat launches Scan, its AR utility platform
Point and shoot? No, point and interact. Snapchat can now help with your homework. The app’s camera is becoming the foundation of an augmented reality developer platform known as “Scan.” Snap today announced partnerships with Photomath to add the ability to solve math problems, and Giphy for detecting objects, which then spawn related GIFs onscreen. Scan will roll out to all Snapchat users soon, and developers interested in joining the platform can contact Snap.
Snapchat Scan spawns Giphy GIFs based on what’s around you
Previously, Snapchat’s camera could identify songs with Shazam and recognize objects so you could buy them on Amazon. But now instead of just offering a few scattered tools, Snapchat is crystallizing its plan to let you reveal hidden information about the world around you.
“Our camera lets the natural light from our world penetrate the darkness of the internet . . . as we use the internet more and more in our daily lives, we need a way to make it a bit more human,” said Snap CEO Evan Spiegel at the company’s first-ever press event, the Snap Partner Summit. There it also announced it would launch an ad network, power Stories in other apps and launch a real-time multiplayer games platform.
Scan with Photomath solves math problems
Others like Blippar have tried to build AR utility platforms, but they lacked the community and daily use necessary to already be top of mind when people want to scan something. But Snap CEO Evan Spiegel today revealed that, “In the United States, Snapchat now reaches nearly 75 percent of all 13 to 34-year-olds, and we reach 90 percent of 13 to 24-year-olds. In fact, we reach more 13 to 24-year-olds than Facebook or Instagram in the United States, the U.K., France, Canada and Australia.”
The comparison data comes from Facebook’s ad manager estimates, which aren’t always totally accurate. Still, the stats demonstrate that amongst the audience likely to explore the world via augmented reality, Snapchat is huge. Even if Facebook wanted to build this behavior, it can’t, because the Facebook Camera isn’t the heart of its social network.
When users tap and hold on the Snapchat camera, they’ll start to Scan their surroundings. Answers to math equations will magically appear. If you view a $10 bill, Hamilton will come alive and sing a song from the musical. Scan a slice of pizza and a dancing Giphy pizza slice appears. Users will also see the new Snapchat AR Bar with dedicated buttons to Scan, create a lens or explore the 400,000 AR Lenses created by Snapchat’s community. Indeed, 75 percent of Snap’s 186 million daily users play with Lenses each day, combining into 15 billion total plays to date. Scan was built off the acquisition of a startup called Scan.me, which until now has powered Snap’s QR Snapcodes that let people add friends or unlock Lenses.
Snap’s new AR Bar
Outside of utility, Snapchat is also adding a slew of new creative AR features to keep that audience entertained and loyal. For example, it’s launching Landmarkers, which uses point cloud data from user-submitted Our Stories of major landmarks to power animated AR transformations of famous places. Now the Eiffel Tower, Buckingham Palace, LA’s Chinese Theater, DC’s Capitol Building and NYC’s Flatiron Building can spew rainbows, shoot lightning and more.
Snapchat’s new Landmarkers
For developers and Lens creators using Snap’s Lens Studio tools, Snap is launching new Creator Profiles where they can show off all the Lenses they’ve contributed. They’ll all have access to new AR templates for hand, body and pet effects that take care of all the hardcore computer science. Creators just add their graphical assets like a mustache for dogs, fireballs that shoot out of people’s hands or rainbows that appear over someone when they hold their arms out.
Snapchat’s new Lens Creator profiles
Snap will even surface relevant community Lenses in the Lens Carousel based on what its Scans pick up. One place it falls short, though, is there’s no direct monetization opportunities for independent Lens creators, beyond Snap occasionally connecting the best AR artists to brands for paid Lens development deals. Snapchat admits it will need to create better incentives long-term.
At a big press briefing yesterday, the company’s top execs explained that growth isn’t Snapchat’s success metric any more. That’s convenient, considering the launch of Instagram Stories cut Snap’s growth from 17 percent per quarter to it actually losing users and only stabilizing this quarter. Instead, Spiegel says, deepening user engagement, and thereby the ad revenue users generate, is Snap’s path forward.
The more Snap gets users playing with augmented reality filters and the better development tools it provides, the more brands and devs will pay to promote their Lenses in the Lens Carousel or through video ads where users swipe up to try a Lens.
But that engagement is also critical to beating Facebook and Instagram to the next phase of AR. Instagram Stories might have 500 million daily users, but they’re mostly applying AR to their faces, not to interact with the world. Snapchat needs as many fun AR entertainment experiences like Landmarkers as possible to normalize AR exploration, which will unlock the potential of the Scan platform. That could one day fuel affiliate fees from AR commerce sales and other revenue streams.
Plus, Snapchat says Lenses are coded to be compatible with not just iOS and Android, but future AR hardware platforms. To build the biggest repository of AR experiences, Snapchat needs help, as I wrote two years ago that Snap’s anti-developer attitude was an augmented liability. Now it’s finally building the tools and platform to harness a legion of developers to fill the physical world with imaginary wonder. “If we can show the right Lens in the right moment, we can inspire a whole new world of creativity,” concludes Snap co-founder Bobby Murphy
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Foursnap? Snapchat tries ‘Status’ location check-ins
Today’s teens missed the Foursquare era, so Snapchat is giving them another shot with a new feature to aid in-person meetups. Snapchat is now testing Status, an option to share to the Snap Map a Bitmoji depicting what you’re up to at a certain place. You could show your little avatar playing video games, watching TV, asking friends to hit you up and more. And Snapchat will compile these into a private diary of what you’ve been doing, called Passport
This fixes the biggest problem with Snap Map and many other location check-in apps. Just because someone is down the street doesn’t mean they want you to drop in on them. They could working, in a meeting or on a date. Snapchat Status lets people convey their activity and intention so you can tell the difference between “I’m nearby but stuck with my parents” and “I’m nearby and want to hang out!” As Snapchat refocuses on messaging after Instagram stole its Stories thunder, Status could ensure there’s more to see that makes Snap Map worth opening.
Snapchat Status and Passport were first spotted by reverse-engineering expert and frequent TechCrunch tipster Jane Manchun Wong. “Share the Moment with Status,” the introduction to the feature explains. “You can now share where you are or what you’re up to. Your Status will only be visible to friends you share your location with.” To see your status, you choose from reams of poses for your Bitmoji ranging from them reading a book to holding a sign saying “text me?”
Meanwhile, “Passport is Just For You: Passport helps you keep track of the Places you’ve been. Places you set your Status at will be added to your Passport along with who you were there with. Only you ca see your Passport, and you can delete a Place from your history at any time.” Your Status only lasts until you leave a place, but it’s tallied along with the number of countries and cities you’ve check into on your Passport.
A Snap spokesperson confirms that “Yes, we are currently testing new ways for Snapchatters to better communicate on the Snap Map with their friends. This test is running with a percentage of Snapchatters in Australia.” Previously, special Bitmoji were only displayed on the Snap Map involuntarily, like when you were road tripping or flying to a new place; visited somewhere special like a beach, mall or major event; or if there was a breaking news moment.
If you don’t want to use Status or even show up on Snap Map, you can go into ghost mode at any time, plus all your location-based content disappears if you don’t open the app for eight hours. And if you do want to be found, you can check who’s viewed your location or Status in case you need to know who’s blowing you off.
Snap launched Snap Map back in June 2017, basing the idea off its acquisition of French location startup Zenly that it bought for $213 million in cash plus bonuses. Beyond spurring real-world interaction, Snap has also made Snap Map an embeddable way to explore breaking news events or hotspots around the world. Status could provide structured data about your behavior, which could beef up Snapchat’s scrawny repository of ad-targeting information. The app could even try surfacing nearby businesses or discounts.
Snapchat’s tighter-knit social graph and stronger track record on privacy lets it offer features that would freak people out if built by Mark Zuckerberg. Given Facebook is aggressively cloning Snap’s whole product philosophy, from its direct copy of Stories to ephemeral messaging to its premium content hubs Watch and IGTV, Snapchat desperately needs to differentiate. Luckily, Facebook has failed to figure out offline meetups, and has yet to roll out the “Your Emoji” status feature that similarly tries to convey what you’re up to visually but within Messenger instead of a map.
Doubling down on Snap Map is a smart move because its one of the few areas where Facebook can’t follow.
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Unicorns aren’t profitable, and Wall Street doesn’t care
In Silicon Valley, investors don’t expect their portfolio companies to be profitable. “Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies,” a bible for founders, instead calls for heavy spending on growth to scale in an Amazon -like fashion.
As for Wall Street, it’s shown an affinity for stock in Jeff Bezos’ business, despite the many years it spent navigating a path to profitability, as well as other money-losing endeavors. Why? Because it too is far less concerned with profitability than market opportunity.
Lyft, a ride-hailing company expected to go public this week, is not profitable. It posted losses of $911 million in 2018, a statistic that will make it the biggest loser amongst U.S. startups to have gone public, according to data collected by The Wall Street Journal. On the other hand, Lyft’s $2.2 billion in 2018 revenue places it atop the list of largest annual revenues for a pre-IPO business, trailing behind only Facebook and Google in that category.
Wall Street, in short, is betting on Lyft’s revenue growth, assuming it will narrow its loses and reach profitability… eventually.
Wall Street’s hungry for unicorns
Lyft, losses notwithstanding, is growing rapidly and Wall Street is paying attention. On the second day of its road show, reports emerged that its IPO was already oversubscribed. As a result, Lyft is said to have upped the cost of its stock, with new plans to raise more than $2 billion at a valuation upwards of $25 billion. That represents a revenue multiple of more than 11x, a step up multiple of more than 1.6x from its most recent private valuation of $15.1 billion and, of course, Wall Street’s insatiable desire for unicorns, profitable or not.
New data from PitchBook exploring the performance of billion-dollar-plus VC exits confirms Wall Street’s leniency toward unprofitable tech companies. Sixty-four percent of the 100+ companies valued at more than $1 billion to complete a VC-backed IPO since 2010 were unprofitable, and in 2018, money-losing startups actually fared better on the stock exchange than money-earning businesses. Moreover, U.S. tech companies that had raised more than $20 million traded up nearly 25 percent of 2018, while the S&P 500 technology sector posted flat returns.
Wall Street is still adapting to the rapid growth of the tech industry; public markets investors, therefore, are willing to deal with negative to minimal cash flows for, well, a very long time.
A tolerance for outsized exits
There’s no doubt Lyft and its much larger competitor, Uber, will go public at monstrous valuations. The two IPOs, set to create a whole bunch of millionaires and return a number of venture capital funds, will provide Silicon Valley a lesson in Wall Street’s tolerance for outsized exits.
Much like a seed-stage investor must bet on a founder’s vision, Wall Street, given a choice of several unprofitable businesses, has to bet on potential market value. Fortunately, this strategy can work quite well. Take Floodgate, for example. The seed fund invested a small amount of capital in Lyft when it was still a quirky idea for ridesharing called Zimride. Now, it boasts shares worth more than $100 million. I’m sure early shareholders in Amazon — which went public as a money-losing company in 1997 — are pretty happy, too.
Ultimately, Wall Street’s appetite for unicorns like Lyft is a result of the shortage of VC-backed IPOs. In 2006, it was the norm for a company to make its stock market debut at 7.9 years old, per PitchBook. In 2018, companies waited until the ripe age of 10.9 years, causing a significant slowdown in big liquidity events and stock sales.
Fund sizes, however, have grown larger and the proliferation of unicorns continues at unforeseen rates. That may mean, eventually, an influx of publicly shared unicorn stock. If that’s the case, might Wall Street start asking more of these startups? At the very least, public market investors, please don’t be swayed by WeWork‘s eventual stock offering and its “community adjusted EBITDA.” Silicon Valley’s pixie dust can’t be that potent.
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Jeffrey Katzenberg’s streaming service Quibi is doing a show about Snapchat’s founding
Jeffrey Katzenberg and Meg Whitman today announced a slate of new series and projects heading to their forthcoming video streaming service, Quibi. The list includes an origin story to complement Telemundo’s hit show “El Señor de los Cielos;” a music competition show produced by Justin Bieber manager and entertainment exec Scooter Braun; a show from Jennifer Lopez’s company about the power of giving and paying it forward; as well something called “Frat Boy Genius,” which will focus on the rise of Snapchat — and specifically its creator, Evan Spiegel.
“It is the story of how he built and created Snapchat, which is one of the great social platforms of our time,” touted Katzenberg. “And we want to tell a story that is as compelling and interesting about the creation of Snapchat and Evan’s story as “[The] Social Network” was for Facebook,” he added.
The project will be based on the screenplay by the same name, which had written Spiegel as a hard-partying Stanford student, according to Vulture’s review of the much-hyped script.
“He should be flattered,” remarked Katzenberg, of Quibi’s plans for the Spiegel-focused project.
And now to the featured scripts! First up: @Elissits‘ FRAT BOY GENIUS, illustrated by @boxbrown. pic.twitter.com/GW8KQclrrB
— The Black List (@theblcklst) December 17, 2018
Katzenberg and Quibi CEO Meg Whitman were at SXSW to speak about the upcoming streaming video service, which plans to offer short-form video designed for mobile. On Quibi, consumers watch “quality” video cut into smaller pieces, including both scripted and unscripted original content, exclusives from Quibi’s partners and other daily news and sports programming.
Already, some of Quibi’s content plans have been announced.
For example, Deadline reported last fall that filmmakers Sam Raimi, Guillermo del Toro and Antoine Fuqua and producer Jason Blum will all create series for the service. And a pitch deck had touted other examples of Quibi’s programming — like a show called “Inspired By” with Justin Timberlake and “Under the Gun” with Kobe Bryant. Plus, Katzenberg himself had revealed in a LinkedIn post that Quibi was working on a basketball-related series with Steph Curry’s production company.
However, the story about Snapchat’s founding highlights how Quibi could benefit from its combination of tech and entertainment industry roots, in terms of deciding what to greenlight.
Whitman, a former HP Enterprise president and CEO, also pointed to another example: her penchant for using data to make decisions.
“I am deeply analytical and Jeffrey will argue in stories and allegories,” Whitman said. “And I will say: ‘Jeffrey, do you have any data to suggest that what you have just said is true?’ And he’ll say, ‘no I don’t have any data — but it’s true,’ ” she explained.
“Then I will come with data, facts, total available market size, market segmentation, market research, and he will say, ‘you know, not everything yields to analysis.’ And I’ll say ‘no, not everything does, but most things do,’ ” she said.
For the most part, today’s onstage discussion was a pitch for why Quibi will work and why it needs to exist — with Katzenberg touting its promise as an app that will benefit from 5G mobile networks as well as the cord-cutting behavior among younger millennials, who are no longer interested in traditional pay TV.
Both execs also stressed that Quibi was not a Netflix or YouTube competitor — despite angling for the same share of consumers’ mobile minutes and a set amount of downtime not spent on social media and mobile gaming, for example. They instead believe Quibi will be additive, and other services — like Netflix and Disney+ — can still win, even as Quibi wins.
Katzenberg said that Quibi aims to grab 20 minutes of the 70 minutes per day people spend watching short-form video, but doesn’t believe it will necessarily come at the expense of YouTube or others.
“Six years ago it was six minutes. A year and a half ago, it was 40 minutes. And today it’s 70 minutes,” he said, illustrating mobile video’s rise. “People love being able to watch great short-form content on the go.”
“What we know is that our users are watching a lot of video on mobile. They’re excited about the opportunity to see something differentiated. But honestly, we’re using a lot of judgment, and we’ll know whether it works when it launches,” Whitman added.
Quibi will publish more than 100 pieces of content every week, meaning it’s going to be making 5,300-5,400 pieces of content per year, Katzenberg said. He also mentioned a few others examples of programming, including a daily round-up of the best of late night TV, and spoke more vaguely of the potential for a show that delivered music news, the way that MTV’s Kurt Loder once did.
The streaming service is launching in April 2020, Katzenberg also confirmed today, putting a more definitive time stamp on the launch time frame beyond “early 2020” or “spring.”
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Snapchat’s Android usage keeps falling but rebuild tests well
Snap has finally begun publicly testing the engineering overhaul of its slow and buggy Android app that for years has cost Snapchat users. Promising early results and reduction in app startup time could help Snapchat fix its growth problem after daily active users sank in Q2 and Q3 before staying put at 186 million in Q4, Snap announced in its earnings report today.
“We ended the year with user engagement stabilizing and have started rolling out the new version of our Android application to a small percentage of our community,” CEO Evan Spiegel wrote. “Early tests show promising results especially on less performant devices, including a 20 percent reduction in the average time it takes to open Snapchat.” The problem is that because “Our engineering team remains focused on rebuilding our Android application,” they haven’t been dedicated to fixing the existing version. That means that despite iOS daily active users and average time spent growing faster than last year, Android dragged Snapchat again to see no total daily user growth.
Interim Chief Financial Officer Lara Sweet noted that, “While we are not going to give specific guidance on daily active users, we are cautiously optimistic and we do not foresee a sequential decline in daily active users in Q1 2019.” It seems Snap believes the new year is going well and the Android rollout could stem losses so it might finally grow its user count again, or at least stop shrinking.
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Snapchat launches Bitmoji merch and comic strips starring your avatar
Snapchat is doubling down on its biggest differentiator by turning its personalized avatar Bitmoji into a revenue stream and a new source of content. Snapchat is launching a Bitmoji merchandise store you can customize with you and your friends’ cartoonified faces, Bitmoji Stories comic strips featuring you and friends’ avatars in fun scenes and a new Friendship profile that collects all the content you and a friend have saved from your Snap message thread.
The new features could help earn Snapchat money to reduce its still-massive quarterly losses, get Snap’s brand out in public and give people new ways to spend more time on Snapchat when it’s otherwise been losing users.
Snapchat, the e-commerce company
The Bitmoji merchandise store opens Thursday in the U.S. on iOS only with $2 stickers, $15 coffee mugs, $16 standard t-shirts and notebooks, $22 triblend t-shirts, $27 sweatshirts and more that users can personalize by adding their Bitmoji, one of their friends’, them and a friends’ playing together, or any two of their friends. Phone cases, towels and pillows are also available. You can access the Bitmoji store from Snap Store in the Settings menu of Snapchat’s app. Snapchat first launched its Snap Store in Ghostface Chillah logo merchandise back in February to sell Dancing Hot Dog dolls, ghost pool floats and puppy selfie-filter shirts.
The new merch could help Snap show off its name and brand, reminding people to use the app as they can’t get the true Bitmoji anywhere else. Snap could also use the revenue given that it lost $325 million last quarter and might have to take outside investment or be acquired as it may not break even before running out of cash.
Snap comics
Back before it settled on the idea of turning personalized emoji into stickers you could use in chat, Bitmoji parent company Bitstrips started as a comic strip creator. You could make an avatar and then create little scenes for them to star in. The idea was inspired by co-founder Jacob “BA” Blackstock’s school days when he and friends would draw comic strips when they were bored. Now Snap is getting back to Bitmoji’s roots.
Bitmoji Stories launch tomorrow in the U.S. A Snapchat spokesperson tells me “Bitmoji Stories will tell lighthearted stories in the form of short comic strips. Bitmoji Stories are created by Snap (from the Bitmoji content team), and will star the Snapchatter solo or with a friend.” They’ll be constantly updated with new adventures, and they’re quite reminiscent of lifelike avatar startup Genies’ scenes. By creating a new form of Discover content in-house, Snapchat could draw more time and therefore more ad views out of its audience. And because there’s no outside publisher to pay, Snapchat can keep all the ad revenue.
Snap’s big competitors have largely failed to field a viable Bitmoji competitor. A year ago I wrote that “Facebook seriously needs its own Bitmoji,” and in May, we broke the news that Facebook Avatars were in the works — though the prototypes were pretty ugly. Each day Facebook delays, Bitmoji becomes more entrenched as the avatar standard. Two weeks ago, Google launched its own Gboard Mini avatars that you can automatically create with a selfie, rather than having to configure them manually like on Snapchat. But when it comes to an illustrated version of you, even tiny missteps can make you look monstrous. Plus, people love wasting time customizing avatars. Snap’s version still reigns supreme.
Besties are Snap’s best shot
And lastly, today Snapchat begins globally rolling out its Friendship profiles. Accessible by clicking on a friend’s Bitmoji (or blank avatar if they haven’t made one) from Chat, Stories, Discover or search, Snapchat says they “make it easy to find your favorite memories and the important information you’ve saved over time.” That includes, photos, videos, messages, and links saved from your otherwise ephemeral chats, plus a quick way to see that bestie on the Snap Map.
None of these features is so seismic as to change the overall momentum of Snapchat, which has been struggling lately with shrinking user counts, a battered share price and non-stop executive departures. Its VP of Content Nick Bell left yesterday. Having talked with him, he’s one of the smartest minds in modern mobile content, and Snap’s hopes to get rid of the clickbait and messy design of Discover may be more difficult without him.
The strategy of focusing on best friends is smart, though. The one thing Facebook and Instagram can’t copy is Snapchat’s tight social graph of just your closest pals. Those competitors allowed their networks to bloat with acquaintances, family and colleagues that can make people less comfortable openly sharing. Now that they’ve copied Snapchat’s Stories broadcasting to a wider audience, Snap must refocus on best friends if it wants to stay unique and turn its smaller size and graph into an asset instead of a liability.
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Snapchat loses 2M more users in Q3 as shares sink to new low
Snapchat continued to shrink in Q3 2018 but its business is steadily improving. Snapchat’s daily active user count dropped again, this time by 1 percent to 186 million, down from 188M and a negative 1.5 percent growth rate in Q2. User count is still up 5 percent year-over-year, though. Snapchat earned $298 million in revenue with an EPS loss of $0.12, beating Wall Street’s expectations of $283 million in revenue and EPS loss of $0.14, plus a loss of a half a million users.
Snap entered earnings with a $6.99 share price, close to its $6.46 all-time low and way down from its $24 IPO opening price. Snap lost $325 million this quarter compared to $353 million in Q2, so it’s making some progress with its cost cutting. That briefly emboldened Wall Street, which pushed the share price up 8.3 percent to around $7.57 right after earnings were announced.
But then Snap’s share price came crashing down to -9.3 percent to $6.31 in after-hours trading. The stock had been so heavily shorted by investors that it only needed modest growth in its business for shares to perk up, but the fear that Snap might shrink into nothing has investors weary. Projections that Snap will lose users again next quarter further scared off investors.
Worringly, Snapchat’s average revenue per user dropped 12.5 percent in the developing world this quarter. But strong gains in the US and Europe markets grew global ARPU by 14 percent. Snap projects $355 million to $380 million in holiday Q4 revenue, in line with analyst estimates.
In his prepared remarks, CEO Evan Spiegel admitted that “While we have incredible reach among our core demographic of 13- to 34-year-olds in the US and Europe, there are billions of people worldwide who do not yet use Snapchat.” He explained that the 2 million user loss was mostly on Android where Snapchat doesn’t run as well as on iOS. Noticibly absent was an update on monthly active users in the US and Canada. Snap said that was over 100 million monthly users last quarter, probably in an effort to distract from the daily user shrinkage. The company didn’t update that stat, but did say the “over 100 million” stat was still accurate.
Snap CEO Evan Spiegel
Spiegel had said in a memo that his stretch goal was break-even this year and full-year profitability in 2019. But CFO Tim Stone said that “Looking forward to 2019, our internal stretch output goal will be an acceleration of revenue growth and full year free cash flow and profitability. Bear in mind that an internal stretch goal is not a forecast, and it’s not guidance.”
During the call, Spiegel responded to questions about the Android overhaul’s schedule saying, “Quality takes time. We’re going wait until we get it right”. But analysts piled on with inquiries about how Snap would turn things around in 2019. He admitted Snaps created per day had dropped from 3.5 billion to 3 billion per day, but tried to reassure investors by saying over 60% of our users are still creating snaps every day.
Spiegel said that expanding beyond the 13 to 34-year-old age group in the US and Europe, plus scoring more users in the developing world via the improved Android app would be how it restores momentum. But the problem is that courting older users could sour the perception of its younger users who don’t want their parents, teachers, or bosses on the app.
Now down to $1.4 billion in cash and securities, Snap will need to start reaching more of those international users or improving monetization of those it still has to keep afloat without outside capital.
An Uphill Battle
Q3 saw Snapchat’s launch its first in-house augmented reality Snappable games, while plans for an third-party gaming platform leak. The Snappable Tic-Tac-Toe game saw 80 million unique users, suggesting gaming could be the right direction for Snap to move towards.
It launched Lens Explorer to draw more attention to developer and creator-built augmented reality experiences, plus its Storyteller program to connect social media stars to brands to earn sponsorship money. It also shut down its Venmo-like Snapcash feature. But the biggest news came from its Q2 earnings report where it announced it’d lost 3 million users. That scored it a short-lived stock price pop, but competition and user shrinkage has pushed Snap’s shares to new lows.
Snapchat is depending on the Project Mushroom engineering overhaul of its Android app to speed up performance, and thereby accelerate user growth and retention. Snap neglected the developing world’s Android market for years as it focused on iPhone-toting US teens. Given Snapchat is all about quick videos, slow load times made it nearly unusable, especially in markets with slower network connections and older phones.
Looking at the competitive landscape, WhatsApp’s Snapchat Stories clone Status has grown to 450 million daily users while Instagram Stories has reached 400 million dailies — much of that coming in the developing world, thereby blocking Snap’s growth abroad as I predicted when Insta Stories launched.. Snap Map hasn’t become ubiquitous, Snap’s Original Shows still aren’t premium enough to drag in tons of new users, Discover is a clickbait-overloaded mess, and Instagram has already copied the best parts of its ephemeral messaging. Snap could be vulnerable in the developing world if WhatsApp similarly copies its disappearing chats.
At this rate, Snap will run out of money before it’s projected to become profitable in 2020 or 2021. That means the company will likely need to sell new shares in exchange for outside investment or get acquired to survive.
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9 highlights from Snapchat CEO’s 6,000-word leaked memo on survival
Adults, not teens. Messaging, not Stories. Developing markets, not the U.S. These are how Snapchat will make a comeback, according to CEO Evan Spiegel . In a 6,000-word internal memo from late September leaked to Cheddar’s Alex Heath, Spiegel attempts to revive employee morale with philosophy, tactics and contrition as Snap’s share price sinks to an all-time low of around $8 — half its IPO price and a third of its peak.
“The biggest mistake we made with our redesign was compromising our core product value of being the fastest way to communicate,” Spiegel stresses throughout the memo regarding “Project Cheetah.” It’s the chat that made Snapchat special, and burying it within a combined feed with Stories and failing to build a quick-loading Android app have had disastrous consequences.
Spiegel shows great maturity here, admitting to impatient strategic moves and outlining a cohesive path forward. There’s no talk of Snapchat ruling the social app world here. He seems to understand that’s likely out of reach in the face of Instagram’s competitive onslaught. Instead, Snapchat is satisfied if it can help us express ourselves while finally reaching even meager profitability.
Snapchat may be too perceived as a toy to win enough adults, too late to win back international markets from the Facebook empire and too copyable by good-enough alternatives to grow truly massive. But if Snap can follow the Spiegel game plan, it could carve out a sustainable market through a small but loyal audience who want to communicate through imagery.
Here are the most interesting takeaways from the memo — and why they’re important:
1. Apologizing for rushing the redesign
There were, of course, some downsides to moving as quickly as a cheetah We rushed our redesign, solving one problem but creating many others . . . 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 always went on his gut rather than relying on user data like Facebook. Aging further and further away from his core audience, he misread what teens cared about. The appealing buzz phrase of “separating social from media” also meant merging messaging and Stories into a chaotic list that made both tougher to use. Spiegel seems to have learned a valuable lesson about the importance of A/B testing.
2. Chat is king
Our redesigned algorithmic Friend Feed made it harder to find the right people to talk to, and moving too quickly meant that we didn’t have time to optimize the Friend Feed for fast performance. We slowed down our product and eroded our core product value. . . . 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 . . . 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.
When Snap first revealed the changes, we predicted that “Teen Snap addicts might complain that the redesign is confusing, jumbling all content from friends together.” That made it too annoying to dig out your friends to send them messages, and Snap’s growth rate imploded, with it losing 3 million users last quarter. Expect Snap to optimize its engineering to make messages quicker to send and receive, and even sacrifice some of its bells and whistles to make chat faster in developing markets.
3. Snapchat must beat Facebook at best friends
Your top friend in a given week contributes 25% of Snap send volume. By the time you get to 18 friends, each incremental friend contributes less than 1% of total Snap send volume each. 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.
Facebook’s biggest structural disadvantage is its broad friend graph that’s bloated to include family, co-workers, bosses and distant acquaintances. That might be fine in a feed app, but not for Stories and messaging where you only care about your closest friends. With friend lists and more, Facebook has tried and failed for a decade to find better ways to communicate with your besties. This is the wedge through which Snapchat can attack Facebook. If it develops special features for luring your best friends onto the app and staying in touch with them for better reasons than just maintaining a Snap “Streak,” it could hit Facebook where it can’t defend itself.
4. Discover soars as Facebook Watch and IGTV stumble
Our Shows continue to attract more and more viewers, with over 18 Shows reaching monthly audiences of over 10M unique viewers. 12 of which are Original productions. As a platform overall, we’ve grown the amount of total time spent engaging with our Shows product, almost tripling since the beginning of the year. Our audience for Publisher Stories has increased over 20% YoY, and we believe there is a significant opportunity to continue growing the number of people who engage with Discover content . . .We are also working to identify content that is performing well outside of Snapchat so that we can bring it into Discover.
Discover remains Snapchat’s biggest differentiator, scoring with premium video content purposefully made for mobile. What it really needs, though, are a few must-see tent-pole shows to drag in a wider audience that can get hooked on the reimagined digital magazine experience.
5. But Discover is a mess
Our content team is working hard to experiment with new layouts and content types in the wake of our redesign to drive increased engagement.
Snapchat Discover is an overcrowded pile of clickbait. News outlets, social media influencers, original video Shows and aggregated user content collections all battle for attention in a design that feels overwhelming to the point of exhaustion. Thankfully, Snapchat seems to recognize that more cohesive sorting with fewer images and headlines bombarding you might make Discover a more pleasant lean-back consumption experience.
6. Aging up to earn money
Most of the incremental growth in our core markets like the US, UK, and France will have to come from older users who generate higher average revenue per user . . . Growing in older demographics will require us to mature our application . . . 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 . . . aging-up our community in core markets will also help the media, advertisers, and Wall Street understand Snapchat.
Snapchat can’t just be for cool kids anymore. Their lower buying power and life stage make them less appealing to brands. The problem is that Snapchat risks turning off younger users by courting their older siblings or adults. If, like Facebook, users start to feel like Snapchat is a place for parents, they may defect in search of the next purposefully built app to confuse adults to stay hip.
7. Finally prioritizing developing markets
We already have many projects underway to unlock our core product value in new markets. Mushroom allows our community to use Snapchat on lower-end devices. Arroyo, our new gateway architecture, will speed up messaging and many other services . . . It might require us to change our products for different markets where some of our value-add features detract from our core product value.
Sources tell me Snapchat’s future depends on the engineering overhaul of its Android app, a project codenamed “Mushroom.” Slow video load times and bugs have made Snapchat practically unusable on low-bandwidth connections and old Android phones in the developing world. The company concentrated on the U.S. and other first-world markets, leaving the door open for copycats of Stories built by Instagram (400 million daily users) and WhatsApp (450 million daily users) to invade the developing world and dwarf Snap’s 188 million total daily users. In hopes of a smooth rollout, Snapchat is already testing Mushroom, but it will have to do a ton of marketing outreach to convince frustrated users who ditched the app to give it another try.
8. Fresh ideas, separate apps
We’re currently building software that takes the millions of Snaps submitted to Our Story and reconstructs parts of the world in 3D. We can then build augmented reality experiences on top of those models and distribute them as Lenses . . . If our innovation compromises our core product of being the fastest way to communicate, we should consider create [sic] separate applications or other ways of delivering our innovation.
Snapchat has big plans for augmented reality. It doesn’t just want to stick animations over the top of anywhere, or create AR art installations in a few big cities. It wants to build site-specific AR experiences across the globe. And while everything the company has built to date has lived inside of Snapchat, it’s willing to spawn standalone apps if necessary so that it doesn’t bog down its messaging service. That could give Snapchat a lot more leeway to experiment.
9. The freedom of profitability
Our 2019 stretch output goal will be an acceleration in revenue growth and full year free cash flow and profitability. With profitability comes increased autonomy and freedom to operate our business in the long term best interest of our community without the pressure of needing to raise additional capital.
Snapchat is still bleeding money, losing $353 million last quarter. Snapchat ended up selling 2.3 percent of its equity to a Saudi Arabian prince in exchange for $250 million to lengthen its rapidly shortening runway. And last year it took $2 billion from Chinese gaming giant Tencent. Deals like that could threaten Snapchat’s ability to prioritize its goals alone, not the moral imperatives or developer platforms that would benefit its benefactors. Once profitable, Snapchat won’t have to worry so much about struggling with short-term user growth and can instead focus on retention, societal impact and its true purpose — creativity.
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