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Why IGTV should go premium
It’s been four months since Facebook launched IGTV, with the goal of creating a destination for longer-form Instagram videos. Is it shaping up to be a high-profile flop, or could this be the company’s next multi-billion-dollar business?
IGTV, which features videos up to 60 minutes versus Instagram’s normal 60-second limit, hasn’t made much of a splash yet. Since there are no ads yet, it hasn’t made a dollar, either. But, it offers Facebook the opportunity to dominate a new category of premium video, and to develop a subscription business that better aligns with high-quality content.
Facebook worked with numerous media brands and celebrities to shoot high-quality, vertical videos for IGTV’s launch on June 20, as both a dedicated app and a section within the main Instagram app. But IGTV has been quiet since. I’ve heard repeatedly in conversations with media executives that almost no one is creating content specifically for IGTV and that the audience on IGTV remains small relative to the distribution of videos on Snapchat or Facebook. Most videos on it are repurposed from a brand’s or influencer’s Snapchat account (at best) or YouTube channel (more common). Digiday heard the same feedback.
Instagram announced IGTV on June 20 as a way for users to post videos up to 1 hour long in a dedicated section of the app (and separate app)
Facebook’s goal should be to make IGTV a major property in its own right, distinct from the Instagram feed. To do that, the company should follow the concept embodied in the “IGTV” name and re-envision what television shows native to the format of an Instagram user would look like.
Its team should leverage the playbook of top TV streaming services like Netflix and Hulu in developing original series with top talent in Hollywood to anchor their own subscription service, but in it a new format of shows produced specifically for the vertically oriented, distraction-filled screen of a smartphone.
Mobile video is going premium
Of the 6+ hours per day that Americans spend on digital media, the majority on that is now on their phone (most of it on social and entertainment activities) and video viewing has grown with it. In addition to the decline in linear television viewing and rise of “over-the-top” streaming services like Netflix and Hulu, we’ve seen the creation of a whole new category of video: mobile native video.
Starting at its most basic iteration with everyday users’ recordings for Snapchat Stories, Instagram Stories and YouTube vlogs, mobile video is a very different viewing environment with a lot more competition for attention. Mobile video is watched as people are going about their day. They might commit a few minutes at a time, but not hour-long blocks, and there are distracting text messages and push notifications overlaid on the screen as they watch.
“Stories” on the major social apps have advanced vertically oriented, mobile native videos as their own content format
When I spoke recently with Jesús Chavez, CEO of the mobile-focused production company Vertical Networks in Los Angeles, he emphasized that successful episodic videos on mobile aren’t just normal TV clips with changes to the “packaging” (cropped for vertical, thumbnails selected to get clicks, etc.). The way episodes are written and shot has to be completely different to succeed. Chavez put it in terms of the higher “density” of mobile-native videos: packing more activity into a short time window, with faster dialogue, fewer setup shots, split screens and other tactics.
With the growing amount of time people spend watching videos on their social apps each day — and the flood of subpar videos chasing view counts — it makes sense that they would desire a premium content option. We have seen this scenario before as ad-dependent radio gave rise to subscription satellite radio like Sirius XM and ad-dependent network TV gave rise to pay-TV channels like HBO. What that looks like in this context is a trusted service with the same high bar for riveting storytelling of popular films and TV series — and often featuring famous talent from those — but native to the vertical, smartphone environment.
If IGTV pursues this path, it would compete most directly with Quibi, the new venture that Jeffrey Katzenberg and Meg Whitman are raising $2 billion to launch (and was temporarily called NewTV until their announcement at Vanity Fair’s New Establishment Summit last Wednesday). They are developing a big library of exclusive shows by iconic directors like Guillermo del Toro and Jason Blum crafted specifically for smartphones through their upcoming subscription-based app.
Quibi’s funding is coming from the world’s largest studios (Disney, Fox, Sony, Lionsgate, MGM, NBCU, Viacom, Alibaba, etc.) whose executives see substantial enough opportunity in such a platform — which they could then produce content for — to write nine-figure checks.
TechCrunch’s Josh Constine argued last year Snapchat should go in a similar “HBO of mobile” direction as well, albeit ad-supported rather than a subscription model. The company indeed seems to be stepping further in this direction with last week’s announcement of Snapchat Originals, although it has announced and then canceled original content plans before.
Snapchat announced its Snap Originals last week
Facebook is the best positioned to win
Facebook is the best positioned to seize this opportunity, and IGTV is the vehicle for doing so. Without even considering integrations with the Facebook, Messenger or WhatsApp apps, Facebook is starting with a base of more than 1 billion monthly active users on Instagram alone. That’s an enormous audience to expose these original shows to, and an audience who don’t need to create or sign into a separate account to explore what’s playing on IGTV. Broader distribution is also a selling point for creative talent: They want their shows to be seen by large audiences.
The user data that makes Facebook rivaled only by Google in targeted advertising would give IGTV’s recommendation algorithms a distinct advantage in pushing users to the IGTV shows most relevant to their interests and most popular among their friends.
The social nature of Instagram is an advantage in driving awareness and engagement around IGTV shows: Instagram users could see when someone they follow watches or “likes” a show (pending their privacy settings). An obvious feature would be to allow users to discuss or review a show by sharing it to their main Instagram feed with a comment; their followers would see a clip or trailer, then be able to click-through to the full show in IGTV with one tap.
Developing and acquiring a library of must-see, high-quality original productions is massively capital-intensive — just ask Netflix about the $13 billion it’s spending this year. Targeting premium-quality mobile video will be no different. That’s why Katzenberg and Whitman are raising a $2 billion war chest for Quibi and budgeting production costs of $100,000-150,000 per minute on par with top TV shows. Facebook has $42 billion in cash and equivalents on its balance sheet. It can easily outspend Quibi and Snap in financing and marketing original shows by a mix of newcomers and Hollywood icons.
Snap can’t afford (financially) to compete head-on and doesn’t have the same scale of distribution. It is at 188 million daily active users and no longer growing rapidly (up 8 percent over the last year, but DAUs actually shrunk by 3 million last quarter). Snapchat is also a much more private interface: it doesn’t enable users to see each others’ activity like Facebook, Instagram, LinkedIn, YouTube, Spotify and others do to encourage content discovery. Snap is more likely to create a hub for ad-supported mobile-first shows for teens and early-twentysomethings rather than rival Quibi or IGTV in creating a more broadly popular Netflix or Hulu of mobile-native shows.
It’s time to go freemium
Investing substantial capital upfront is especially necessary for a company launching a subscription tier: consumers must see enough compelling content behind the paywall from the start, and enough new content regularly added, to find an ongoing subscription worthwhile.
There is currently no monetization of IGTV. It is sitting in experimentation mode as Facebook watches how people use it. If any company can drive enough ad revenue solely from short commercials to still profit on high-cost, high-quality episodic shows on mobile, it’s Facebook. But a freemium subscription model makes more sense for IGTV. From a financial standpoint, building IGTV into its own profitable P&L while making substantial content investments likely demands more revenue than ads alone will generate.
Of equal importance is incentive alignment. Subscriptions are defined by “time well spent” rather time spent and clicks made: quality over quantity. This is the environment in which premium content of other formats has thrived too; Sirius XM as the breakout on radio, HBO on linear TV, Netflix in OTT originals. The type of content IGTV will incentivize, and the creative talent they’ll attract, will be much higher quality when the incentives are to create must-see shows that drive new subscribers than when the incentives are to create videos that optimize for views.
Could there be a “Netflix for mobile native video” with shows shot in vertical format specifically for viewing on smartphone?
The optimization for views (to drive ad revenue) have been the model that media companies creating content for Facebook have operated on for the last decade. The toxicity of this has been a top news story over the last year with Facebook acknowledging many of the issues with clickbait and sensationalism and vowing changes.
Over the years, Facebook has dragged media companies up and down with changes to its newsfeed algorithm that forced them to make dramatic changes to their content strategies (often with layoffs and restructuring). It has burned bridges with media companies in the process; especially after last January, how to reduce dependence on Facebook platforms has become a common discussion point among digital content executives. If Facebook wants to get top producers, directors and production companies investing their time and resources in developing a new format of high-quality video series for IGTV, it needs an incentives-aligned business model they can trust to stay consistent.
Imagine a free, ad-supported tier for videos by influencers and media partners (plus select “IGTV Originals”) to draw in Instagram users, then a $3-8/month subscription tier for access to all IGTV Originals and an ad-free viewing experience. (By comparison, Quibi plans to charge a $5/month subscription with ads with the option of $8/month for its ad-free tier.)
Looking at the growth of Netflix in traditional TV streaming, a subscription-based business should be a welcome addition to Facebook’s portfolio of leading content-sharing platforms. This wouldn’t be its first expansion beyond ad revenue: the newest major division of Facebook, Oculus, generates revenue from hardware sales and a 30 percent cut of the revenue to VR apps in the Oculus app store (similar to Apple’s cut of iOS app revenue). Facebook is also testing a dating app which — based on the freemium business model Tinder, Bumble, Hinge, and other leading dating apps have proven to work — would be natural to add a subscription tier to.
Facebook is facing more public scrutiny (and government regulation) on data privacy and its ad targeting than ever before. Incorporating subscriptions and transaction fees as revenue streams benefits the company financially, creates a healthier alignment of incentives with users and eases the public criticism of how Facebook is using people’s data. Facebook is already testing subscriptions to Facebook Groups and has even explored offering a subscription alternative to advertising across its core social platforms. It is quite unlikely to do the latter, but developing revenue streams beyond ads is clearly something the company’s leadership is contemplating.
The path forward
IGTV needs to make product changes if it heads in this direction. Right now videos can’t link together to form a series (i.e. one show with multiple episodes) and discoverability is very weak. Beyond seeing recent videos by those you follow, videos that are trending and a selection of recommendations, you can only search for channels to follow (based on name). There’s no way to search for specific videos or shows, no way to browse channels or videos by topic and no way to see what people you follow are watching.
It would be a missed opportunity not to vie for this. The upside is enormous — owning the Netflix of a new content category — while the downside is fairly minimal for a company with such a large balance sheet.
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Instagram tests tapping instead of scrolling through posts, first in Explore
The effortless way you fast forward through Stories could be coming to more of Instagram . A screenshot from user Suprateek Bose shows Instagram “Introducing a new way to move through posts — Tap through posts, just like you tap through stories.”
Now Instagram confirms to TechCrunch that it’s testing tap to advance within Explore, and a spokesperson provided this statement: “We’re always testing ways to improve the experience on Instagram and bring you closer to the people and things you love.” As for whether this could come to the main feed, an Instagram spokesperson tells me that not something it’s actively thinking about right now.
Instagram already uses an auto-advance feature in its Videos You Might Like section of Explore, jumping down to the next video when the last one finishes. It previously offered themed video collections around Halloween and top creators too. But for photos where it’s not clear when you’re done viewing, a quick tap is the closest thing to Instagram propelling you through posts automatically.
Next: turn your mind off completely. Succumb to the feed.
Open instagram, and it does the browsing of the feed for you.
Like by smiling.
Comment by grunting one of 5 known emotions at your phone. https://t.co/EzrJWccjbh
— PaSKULL D’Silva
(@pasql) October 11, 2018
Tap to advance, pioneered by Snapchat, eliminates the need for big thumbstrokes on your touch screen that can get tiring after awhile. It also means users always see media full-screen rather than having to fiddle with scrolling the perfect amount to see an entire post. Together, these create a more relaxing browsing experience that can devour hours of a user’s time. Instagram doesn’t show ads in Explore, but tap-to-advance could save your thumb stamina for more feed and Stories viewing where it does earn money. While Snapchat remains the teen favorite, Instagram could cater to seniors with arthritis with this new method of navigation (no, seriously, swiping can be tough on the joints for some people).
The fact that tap-to-advance is now testing but Instagram still hasn’t actually rolled out the Your Activity screentime digital well-being dashboard it says was launching two months ago begs the question of whether it really wants us to be more purposeful with our social media usage.
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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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Facebook tests Snap Map-style redesign of Nearby Friends
Helping friends meet up offline has been a massive missed opportunity for Facebook . Whether because the brand is too creepy or the politely opt-in 2015 rollout of its location sharing feature wasn’t creepy enough, Facebook Nearby Friends never quite took off. Only 103 of my 1,120 friends in San Francisco have it turned on.
It’s not the only one struggling with “The quest to cure loneliness.” Foursquare Swarm, Glympse, Apple’s Find My Friends and Google Maps’ real-time coordinate-sharing option have all failed to become a ubiquitous standard.
The redesigned map homescreen of Facebook Nearby Friends
But last year, Snapchat launched a different take on the idea based on its biggest acquisition ever, French app Zenly. With Snap Map, it wasn’t just about the utility of seeing a list of friends’ locations like on Facebook, but also splayed them out across maps that you could dive into to see their latest geo-tagged Stories. It was as much about fun and content as it was about actually hanging out with people in person.
Now Facebook is testing a significant redesign of Nearby Friends that looks a lot more like Snap Map. It replaces the list view of the neighborhoods and cities friends are in with a map that groups friends together by city. A “view list” button opens up the former homescreen, though in both views you still can only see a friend’s approximate location in a neighborhood or city, not their exact coordinates. Facebook confirms to TechCrunch that “We’re testing a new design for Nearby Friends, a tool people have used for the past four years to meet with their friends in person. People have complete control over whether to use Nearby Friends or not. They can turn it on in the Nearby Friends bookmark.”
That statement both subtly promotes Facebook’s opt-in privacy setting for Nearby Friends while urging people to actually go back and activate it. The screenshot was generated from the code of Facebook’s Android app by mobile researcher and frequent TechCrunch tipster Jane Manchun Wong. Interestingly, after TechCrunch’s inquiry, Wong tells me Facebook appears to have deactivated server-side the ability to access the map feature.
The reason this matters is that Facebook is desperate for engagement, especially amongst younger users who are slipping away from it to Snapchat and Instagram. If revamped with this map and other improvements, Nearby Friends could become a more popular utility that keeps people opening Facebook. Getting more people to share their real-time location could open new opportunities for local ad targeting. And Facebook could benefit from showing it unlocks meaningful offline connections given its recent brand troubles following election interference and calls that it’s the opposite of “time well spent.”
The existing design of Facebook Nearby Friends
Snap Map was smart, but it’s sadly buried behind an awkward pinch gesture from Snapchat’s homescreen, or inside the search bar where some users wouldn’t expect it. Internal Snapchat usage data scored by Taylor Lorenz for The Daily Beast revealed that Snap Map had sunk from a high of 35 million daily unique viewers after its June 2017 launch to just 19 million by that September — merely 11 percent of Snapchat’s users at the time. Users never seemed to cease on it as a method of browsing Snapchat’s geo-tagged content.
Unfortunately, none of these location apps have figured out that meeting up isn’t all about location. It’s about availability. It doesn’t matter if I see my best friend is at a coffee shop right away if they’re not actually available to hang out. They could be on date, having a business meeting or trying to get some work done. If I drop in just because I see they’re close by, it could be awkward. You’d have to first message them, but you can come off seeming desperate if they can’t or don’t want to meet up with you.
Location apps need an availability indicator similar to the green “online” dot used by many chat apps. You could toggle that on if you wanted to show you’re interested in some spontaneous friend time.
Facebook’s actually spent the last year trying to build this into Messenger in the form of “Your Emoji” status. It lets you pick an emoji like a martini, fork and knife or barbell that’s temporarily overlaid on your profile pic thumbnail to let people know you’re down for drinking, getting dinner or working out. The feature is yet to be widely tested, indicating that Facebook hasn’t quite cracked the nut of encouraging online meetups.
Ideally, Facebook would combine Nearby Friends and Your Emoji to help users share both approximately where they are and whether they want to hang out. The next step would be making it easy to watch a friend’s geo-tagged Facebook Story from wherever they are. And then, Facebook could further copy Snap Map by making public Stories and other location-based content accessible from the map so you could browse it for fun instead of the News Feed or Stories tray.
Still, making Nearby Friends work could require Facebook to rethink the privacy element. The friend graph has bloated to include family, co-workers, bosses and distant acquaintances with whom users might not want to share their real-time location. Finding a better way to let you share where you are with just your closest friends could make more people comfortable with the feature.
Facebook needs to rethink its entire product stack to embrace the high-definition cameras, big phone screens and fast network connections that make it easier to convey information through imagery than text. Visual communication is the future, and that goes far beyond Stories.
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Snapchat lets you take a photo of an object to buy it on Amazon
See, snap, sale. In a rare partnership for Amazon, the commerce giant will help Snapchat challenge Instagram and Pinterest for social shopping supremacy. Today Snapchat announced it’s slowly rolling out a new visual product search feature, confirming TechCrunch’s July scoop about this project, codenamed “Eagle.”
Users can use Snapchat’s camera to scan a physical object or barcode, which brings up a card showing that item and similar ones along with their title, price, thumbnail image, average review score and Prime availability. When they tap on one, they’ll be sent to Amazon’s app or site to buy it. Snapchat determines if you’re scanning a song, QR Snapcode or object, and then Amazon’s machine vision tech recognizes logos, artwork, package covers or other unique identifying marks to find the product. It’s rolling out to a small percentage of U.S. users first before Snap considers other countries.
Snap refused to disclose any financial terms of the partnership. It could be earning a referral fee for each thing you buy from Amazon, or it could just be doing the legwork for free in exchange for added utility. A Snapchat spokesperson tells me the latter is the motivation (without ruling out the former), as Snapchat wants its camera to become the new cursor — your point of interface between the real and digital worlds.
Social commerce is heating up as Instagram launches Shopping tags in Stories and a dedicated Shopping channel in Explore, while Pinterest opens up Shop the Look pins and hits 250 million monthly users. The feature should mesh well with Snap’s young and culture-obsessed audience. In the U.S., its users are 20 percent more likely to have made a mobile purchase than non-users, and 60 percent more likely to make impulse purchases according to studies by Murphy Research and GfK.
The feature functions similarly to Pinterest’s Lens visual search tool. In the video demo above, you can see Snapchat identifying Under Armour’s HOVR shoe (amongst all its other models), and the barcode for CoverGirl’s clean matte liquid makeup. That matches our scoop based on code dug out of Snapchat’s Android app by TechCrunch tipster Ishan Agarwal. Snapchat’s shares popped three percent the day we published that scoop, and again this morning before falling back to half that gain.
The feature could prove useful for when you don’t know the name of the product you’re looking at, as with shoes. That could turn visual search into a new form of word-of-mouth marketing where every time an owner shows off a product, they’re effectively erecting a billboard for it. Eventually, visual search could help users shop across language barriers.
Amazon is clearly warming up to social partnerships, recognizing its inadequacy in that department. Along with being named Snapchat’s official search partner, it’s also going to be bringing Alexa voice control to Facebook’s Portal video chat screen, which is reportedly debuting this week according to Cheddar’s Alex Heath.
Snapchat could use the help. It’s now losing users and money, down from 191 million to 188 million daily active users last quarter while burning $353 million. Partnering instead of trying to build all its technology in-house could help reduce that financial loss, while added utility could aid with user growth. And if Snap can convince advertisers, they might pay to educate people on how to scan their products with Snapchat.
Snap keeps saying it wants to be a “Camera Company,” but it’s really an augmented reality software layer through which to see the world. The question will be whether it can change our behavior so that when we see something special, we interact with it through the camera, not just capture it.
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It’s the end of crypto as we know it and I feel fine
Watching the current price madness is scary. Bitcoin is falling and rising in $500 increments with regularity and Ethereum and its attendant ICOs are in a seeming freefall with a few “dead cat bounces” to keep things lively. What this signals is not that crypto is dead, however. It signals that the early, elated period of trading whose milestones including the launch of Coinbase and the growth of a vibrant (if often shady) professional ecosystem is over.
Crypto still runs on hype. Gemini announcing a stablecoin, the World Economic Forum saying something hopeful, someone else saying something less hopeful – all of these things and more are helping define the current market. However, something else is happening behind the scenes that is far more important.
As I’ve written before, the socialization and general acceptance of entrepreneurs and entrepreneurial pursuits is a very recent thing. In the old days – circa 2000 – building your own business was considered somehow sordid. Chancers who gave it a go were considered get-rich-quick schemers and worth of little more than derision.
As the dot-com market exploded, however, building your own business wasn’t so wacky. But to do it required the imprimaturs and resources of major corporations – Microsoft, Sun, HP, Sybase, etc. – or a connection to academia – Google, Netscape, Yahoo, etc. You didn’t just quit school, buy a laptop, and start Snapchat.
It took a full decade of steady change to make the revolutionary thought that school wasn’t so great and that money was available for all good ideas to take hold. And take hold it did. We owe the success of TechCrunch and Disrupt to that idea and I’ve always said that TC was career pornography for the cubicle dweller, a guilty pleasure for folks who knew there was something better out there and, with the right prodding, they knew they could achieve it.
So in looking at the crypto markets currently we must look at the dot-com markets circa 1999. Massive infrastructure changes, some brought about by Y2K, had computerized nearly every industry. GenXers born in the late 70s and early 80s were in the marketplace of ideas with an understanding of the Internet the oldsters at the helm of media, research, and banking didn’t have. It was a massive wealth transfer from the middle managers who pushed paper since 1950 to the dot-com CEOs who pushed bits with native ease.
Fast forward to today and we see much of the same thing. Blockchain natives boast about having been interest in bitcoin since 2014. Oldsters at banks realize they should get in on things sooner than later and price manipulation is rampant simply because it is easy. The projects we see now are the Kozmo.com of the blockchain era, pie-in-the-sky dream projects that are sucking up millions in funding and will produce little in real terms. But for every hundred Kozmos there is one Amazon .
And that’s what you have to look for.
Will nearly every ICO launched in the last few years fail? Yes. Does it matter?
Not much.
The market is currently eating its young. Early investors made (and probably lost) millions on early ICOs but the resulting noise has created an environment where the best and brightest technical minds are faced with not only creating a technical product but also maintaining a monetary system. There is no need for a smart founder to have to worry about token price but here we are. Most technical CEOs step aside or call for outside help after their IPO, a fact that points to the complexity of managing shareholder expectations. But what happens when your shareholders are 16-year-olds with a lot of Ethereum in a Discord channel? What happens when little Malta becomes the de facto launching spot for token sales and you’re based in Nebraska? What happens when the SEC, FINRA, and Attorneys General from here to Beijing start investigating your hobby?
Basically your hobby stops becoming a hobby. Crypto and blockchain has weaponized nerds in an unprecedented way. In the past if you were a Linux developer or knew a few things about hardware you could build a business and make a little money. Now you can build an empire and make a lot of money.
Crypto is falling because the people in it for the short term are leaving. Long term players – the Amazons of the space – have yet to be identified. Ultimately we are going to face a compression in the ICO and, for a while, it’s going to be a lot harder to build an ICO. But give it a few years – once the various financial authorities get around to reading the Satoshi white paper – and you’ll see a sea change. Coverage will change. Services will change. And the way you raise money will change.
VC used to be about a team and a dream. Now it’s about a team, $1 million in monthly revenue, and a dream. The risk takers are gone. The dentists from Omaha who once visited accelerator demo days and wrote $25,000 checks for new apps are too shy to leave their offices. The flashy VCs from Sand Hill have to keep Uber and Airbnb’s plates spinning until they can cash out. VC is dead for the small entrepreneur.
Which is why the ICO is so important and this is why the ICO is such a mess right now. Because everybody sees the value but nobody – not the SEC, not the investors, not the founders – can understand how to do it right. There is no SAFE note for crypto. There are no serious accelerators. And all of the big names in crypto are either goldbugs, weirdos, or Redditors. No one has tamed the Wild West.
They will.
And when they do expect a whole new crop of Amazons, Ubers, and Oracles. Because the technology changes quickly when there’s money, talent, and a way to marry the two in which everyone wins.
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Snapchat shares hit all-time low as search acquisition Vurb’s CEO bails
Snapchat’s sagging share price is making it tough to retain talent. Bobby Lo, founder and CEO of mobile search app Vurb that Snap Inc acquired for $114.5 million two years ago is leaving day-to-day operations at the company. That means Lo cut out early on his four-year retention package vesting schedule, which was likely influenced by Snapchat falling to new share price lows. Snap is trading around $9.15 today, compared to its $17 IPO price and $24 first-day close.
That’s down over 7 percent from yesterday following BTIG analyst Rich Greenfield gave Snap a sell rating with a target price of $5 saying “We are tired of Snapchat’s excuses for missing numbers and are no longer willing to give management ‘time’ to figure out monetization.” Greenfield is known as one of the top social network analysts, so people take him seriously when he says “We have been disappointed in SNAP’s product evolution (as have users) and see no reason to believe this will change.”
Vurb is a good example of this. The app let users make plans with friends to visit local places, allowing them to bundle restaurants, movie theaters, and more into shareable decks of search cards. It took over a year after the October 2016 acquisition for the tech to be integrated into Snapchat in the form of context cards in search. But Snap never seemed to figure out how to make its content-craving teen audience care about Vurb’s utility. Snap could have built powerful offline meetup tools out of the cards but never did, and lackluster Snap Map adoption furthered clouded the company’s path forward around local businesses.
Now Lo tells TechCrunch of his departure, “Building experiences at Snap has been a wonderful culmination of my seven-year startup journey with Vurb. My transition to an advisor at Snap lets me continue supporting the amazing people there while directing my time back into startups, starting with investing and advising in founders.”
Lo was early to embrace the monolithic app style pioneered by WeChat in China that’s become increasingly influential in the states. Snap confirmed the departure while trying to downplay it. A spokesperson tells me, “Bobby transitioned to an advisory role this summer, and we appreciate his continued contributions to Snap.”
Given Snap is known to back-weight its stock vesting schedules, Lo could be leaving over half of his retention shares on the table. That decision should worry investors. As a solo founder, Lo already made off with a big chunk of the acquisition price that including $21 million in cash and $83 million in stock, so with the company’s share price so low, he might have had little incentive to stay.
Snapchat Context Cards built from Vurb’s acquired technology
Since last July, Snap has lost a ton of talent including SVP of Engineering Tim Sehn, early employee Chloe Drimal, VP of HR and Legal Robyn Thomas and VP of Securities and Facilities Martin Lev, CFO Drew Vollero, VP of product Tom Conrad, TimeHop co-founder Jonathan Wegener, Spectacles team lead Mark Randall, ad tech manager Sriram Krishnan, head of sales Jeff Lucas, and just last week, its COO Imran Khan.
With its user count shrinking, constant competition from Facebook and Instagram, and talent fleeing, it’s hard to see a bright future for Snap. Unless CEO Evan Spiegel, without the help of his departed lieutenants, can come up with a groundbreaking new product that’s not easy to copy, we could be looking at downward spiral for the ephemeral app. At what point must Snap consider selling itself to Google, Apple, Tencent, Disney, or whoever will take on the distressed social network?
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Meet SelfieCircus and 8 more in Snapchat’s new startup accelerator
Snapchat is hedging its bets as its social network shrinks. Today Snap Inc. revealed the first class of its startup accelerator called Yellow that offers $150,000 in funding and creativity-centric business education in exchange for what a source says is a seven to 10 percent equity stake — in line with other accelerators like Y Combinator. The nine companies will take up a three-month residency in one of Snap’s buildings in Venice, Calif., near Los Angeles.
The accelerator class ranges from augmented reality and journalism studios to lifestyle brands around weddings and fashion to aesthetic-focused marketplaces like ConBody that pairs you with a muscular ex-convict for workouts.
Yellow calls itself “A launchpad for creative minds and entrepreneurs who are looking to build the next generation of great media companies.” Yellow could become a content provider and potential acquisition feeder for the company. ANRK and Space Oddity Films could boost Snapchat’s AR gaming effort, Hashtag Our Stories could fill Snap Map with citizen news broadcasts, Toonstar could bring animation to Discover, and SelfieCircus could power marketing pop-ups like the Snapbots that sold the company’s Spectacles.
But at the same time, it’s hard not to see Yellow as a potential escape route for Snap’s business if Instagram’s competition ends up stealing all its users. Snapchat lost three million last quarter, contributing to a massive share price downslide. Following today’s departure of COO Imran Khan, it’s trading at $9.66, just a few cents above its all-time low.
If a few of Yellow’s investments blow up and Snap makes capital available for follow-on rounds, the returns could supplement its ad revenue. But none of this first batch of startups looks poised to be gamechangers the way Snap’s acquisitions of Bitmoji and Looksery’s early AR filters were.
Yellow’s inaugural class
Here’s a look at the first nine companies in Snapchat Yellow, courtesy of write-ups provided by Snap.
ANRK (London, UK) – a new realities studio, exploring immersive storytelling through AR, VR, games and beyond.
- We are passionate about human-centered narratives, and use playful interaction and new technologies to create powerful experiences that connect the digital and physical.
ConBody (New York, NY) – a prison-style fitness bootcamp that hires formerly incarcerated individuals to teach fitness classes.
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ConBody is facilitating an opportunity-filled lifestyle by empowering our community to realize success lies within. We hire formerly incarcerated individuals to build personal discipline through a unique blend of cardiovascular training and bodyweight exercises that take advantage of the resistance properties of everyday objects. We apply military techniques to space constraints intimately familiar to city-dwellers and individuals who reside in small, constrained spaces. In addition, we’re changing the views of formerly incarcerated individuals to be changed by allowing professionals to interact with formerly incarcerated individuals, which gives professionals a different perspective on them.
ConBody
Hashtag Our Stories (Durban, South Africa) – an international mobile journalism (MOJO) network, publishing vertical video stories on social media. Created by citizens, curated by journalists.
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Since September 2017, we’ve empowered 200 citizen storytellers in over 40 countries to produce videos with their phones. We focus on constructive, solutions-based stories and provide more diverse news coverage. Because more cameras and more perspectives means more truth.
Hashtag Our Stories
IDK (Los Angeles, CA) – the ID for Korean music. We are a digital media company expanding in-depth on the music of Korea and K-Pop as a globally recognized genre; showcasing the identity of the artists that shape the culture. We provide insightful and rich coverage and content for the global Korean Pop audience.
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We are creating a Global Brand and Destination for an English-Speaking Korean Pop Audience. Our mission is to create rich and stylized content about the Korean Music Genre; less gossip, more news and features. We want to provide a legitimate outlet for Korean Pop Culture; to create emotive, aspirational stories that are visually chic to a young, hyper-aware and digitally engaged audience.
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As the company begins we will focus on publishing the best in engaging social video content. We will translate this content across platforms, ultimately building brands, shows and stories that feed the insatiable audience appetite for Korean Pop. From there we will build toward live events, merchandise and much more.
Love Stories TV (New York, NY) – a video platform for wedding planning and inspiration, bringing engaged couples and event professionals together in a uniquely visual community. Think of us like “Houzz” for weddings: We connect brides and grooms with the ideas, inspiration, products and services they need for their weddings. [Note: Snap tells me Love Stories TV did not give up a seven to ten percent equity stake as it had previously raised a $1.7 million seed round, but wouldn’t disclose more details about its equity stakes in the other startups.]
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On lovestoriestv.com filmmakers and newlyweds from all over the world share their professionally produced videos along with the data and details about the wedding. Brides and grooms watch the videos to find ideas, inspiration, products and services for their wedding. We also have an active community of pre-engaged-brides under the age of 24 who watch the videos on our site, social and Amazon Prime channel for entertainment. We partner with brands and wedding pros to help them reach brides and grooms on our site and channels via the real wedding films that feature them and original content.
Love Stories TV
Premme (Los Angeles, CA) – a fashion-first, body-positive lifestyle brand for the plus-size It-Girl.
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Today, 67 percent of women in America wear plus-sizes — yet plus-size fashion only accounts for 17 percent of the women’s apparel market. When it comes to media representation, plus-sizes are similarly lacking in positive, aspirational visibility. Premme empowers women who have been historically marginalized through fashion-forward, statement-making clothing and visionary, contemporary editorial content and imagery. By creating a relatable, yet aspirational brand that centers on plus-size women, we aim to flip the script on what it means to look and be stylish, while leading the conversation and movement toward truly diverse and inclusive fashion.
Premme
SelfieCircus (Los Angeles, CA) – a new kind of circus.
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SelfieCircus creates pop-up experiences designed to be documented and shared on social media. The company is building a platform to connect artists, brands and consumers. The first SelfieCircus will open in Los Angeles in late 2018.
SelfieCircus
Space Oddity Films (Los Angeles, CA) – a content studio exploring tech and culture that creates innovative content for every platform: mobile, digital, AR/VR, video games, feature film and television.
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We tell stories about the convergence of humanity and technology. Our original viral tech horror thriller shorts are the foundation of our brand. Our goal is to make the future now.
Space Oddity Films
Toonstar (Los Angeles, CA) – a digital animation network that creates and distributes daily pop culture cartoons for an “always on” world. Powered by proprietary animation tech, we produce daily, snackable, interactive animated content at unprecedented speed and cost.
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We have a large and highly engaged audience of teens and young adults generating millions of views per week because our content is sticky, shareable, relatable and engineered specifically for social. We’re a team of studio alumni and media tech innovators who have produced hit digital animated series, built groundbreaking interactive media technologies and launched mega entertainment franchises. Now we’re on a mission to build a next-gen animation network that delivers greater reach + engagement at a fraction of the operating cost.
Toonstar
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Snapchat adds new styles as Spectacles V2s get used 40% more than V1
Snapchat isn’t revealing sales numbers of version 2 of its Spectacles camera sunglasses, but at least they’re not getting left in a drawer as much as the V1s. The company tells me V2 owners are capturing 40 percent more Snaps than people with V1s.
And today, Snapchat is launching two new black-rimmed hipster styles of Spectacles V2 — a Wayfarer-esque Nico model and a glamorous big-lensed Veronica model. Both come with a slimmer semi-soft black carrying case instead of the chunky old triangular yellow one, and are polarized for the first time. They look a lot more like normal sunglasses, compared to the jokey, bubbly V1s, so they could appeal to a more mature and fashionable audience. They go on sale today for $199 in the US and Europe and will be sold in Neiman Marcus and Nordstrom later this year, while the old styles remain $149.
The new Spectacles styles (from left): Veronica and Nico
Spectacles V2 original style (left) and V1 (right)
Snap is also trying to get users to actually post what they capture, so it’s planning an automatically curated Highlight Story feature that will help you turn your best Specs content into great things to share. That could address the problem common amongst GoPro users of shooting a ton of cool footage but never editing it for display.
The problem is that V1 were pretty exceedingly unpopular, and those that did buy them. Snap only shipped 220,000 pairs and reportedly had hundreds of thousands more gathering dust in a warehouse. It took a $40 million write-off and its hardware “camera company” strategy was called into question. Business Insider reported that less than 50 percent of buyers kept using them after a month and a “sizeable” percentage stopped after just a week.
The new styles come with a slimmer semi-soft carry case
That means the bar was pretty low from which to score a 40 percent increase in usage, especially given the V2s take photos, work underwater, come in a slimmer charging case, and lack the V1s’ bright yellow ring around the camera lens that announces you’re wearing a mini computer on your face. Snap was smart to finally let you export in non-circular formats which are useful for sharing beyond Snapchat, and let you automatically save Snaps to your camera roll and not just its app’s Memories feature.
I’ve certainly been using my V2s much more than the V1s since they’re more discrete and versatile. And I haven’t encountered as much fear or anxiety from people worried about being filmed as privacy norms around technology continue to relax.
But even with the improved hardware, new styles, and upcoming features, Spectacles V2 don’t look like they’re moving the needle for Snapchat. After shrinking in user count last quarter, Snap’s share price has fallen to just a few cents above its all-time low. Given most of its users are cash-strapped teens who aren’t going to buy Spectacles even if they’re cool, the company needs to focus on how to make its app for everyone more useful and differentiated after the invasion of Instagram’s copy-cats of its Stories and ephemeral messaging.
Whether that means securing tentpole premium video content for Discover, redesigning Stories to ditch the interstitials for better lean-back viewing, or developing augmented reality games, Snap can’t stay the course. Despite its hardware ambitions, it’s fundamentally a software company. It has to figure out what makes that software special.
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Snapchat shrinks by 3M users to 188M despite strong Q2
The Stories War has officially killed Snapchat’s growth, leading to its first user count decline ever. In Q2 2018 earnings today, Snapchat’s daily active users number shrank 1.5 percent to 188 million this quarter, down from 191 million and positive 2.9 percent user growth last quarter.
Snapchat did beat earnings expectations with $262.3 million in revenue and a loss of $0.14 while Wall Street estimated an EPS loss of $0.17 with $249.8 million in revenue. Snap’s net loss decreased by 20 percent year-over-year, so it only destroyed $353 million this quarter compared to $385 million last quarter. Snap will have some extra cash to extend its runway despite its still-massive losses thanks to a $250 million investment from Saudi Prince Al-Waleed Talal in exchange for a 2.3 percent stake in the company.
Despite its user count shrinking for the first time since its launch in 2011, the improvement to revenue (up 44 percent year-over-year) and reduced losses led Wall Street to give Snap’s shares an immediate 11 percent pop in after-hours trading. But after dodging multiple questions about how it would improve revenues and when its optimized Android app would arrive, shares fell back to just below the day’s closing price of $13.12.
Snapchat is coming off a disastrous Q1 earnings with its slowest-ever user growth rate that led to a 24 percent plunge in its share price in May. But the company has been highly volatile, seeing a 37 percent boost in its share price after surprisingly positive Q4 2017 earnings. Now it’s proving that Facebook isn’t the only social network with growth troubles.
In hopes of distracting from the shrinking DAUs, Snapchat shared a monthly active user count for the first time: 100 million monthly active users in the U.S. and Canada. Snap says this is the highest it’s ever been, yet the reveal highlights that teens are as addicted to daily Snapchat use as they once were. DAUs are a much more accurate way of measuring engagement and ad revenue potential, as opening a single notification and never returning can still register someone as an MAU.
CEO Evan Spiegel blamed the DAU shrinkage on “a slightly lower frequency of use among our user base due to the disruption caused by our redesign.” But since, he believes “we have now addressed the biggest frustrations we’ve heard” so he’s optimistic about future growth. On the other hand, he credits the redesign as producing an 8 percent increase in retention among users older than 35, demonstrating the new design is more obvious and well labeled.
During the earnings call, Snap’s new CFO Tim Stone mentioned that it’s interested in monetizing every part of the app, including “communication.” That could foreshadow more ads in the messaging inbox beyond the sponsored lenses users can play with to send augmented reality Snaps to friends. Snap is also hoping that after a decline in ad prices as it moved to self-serve auctions, ad prices and revenue will climb.
One big bright point for Snap was that its average revenue per user in the Rest Of World region grew 65 percent just this quarter to reach $0.96. Figuring out how to monetize these developing countries where buying power is lower will be key to the company’s outlook. Snap says it’s still working to re-engineer its Android app to boost performance and reduce churn, since that’s where most of its new users are coming in.
The quarter saw Snapchat escape much of the scrutiny facing other social networks regarding fake news and election interference. But it clearly still has issues with security, as Snapchat accidentally leaked its own source code, which was archived by someone who then posted it to GitHub today, though it was eventually taken down.
Snapchat started running un-skippable ads in its Shows that could be a big money maker if extended to Stories. It began experimenting with e-commerce in earnest, allowing brands to sell things people can buy without leaving the app. It also opened self-serve buying of its augmented reality lens ads that people not only post, but play with for extended periods of time. And it launched its privacy-safe Snap Kit developer platform in hopes that alliances and referral traffic would help revive its user growth.
But problematically, its competitors like Instagram Stories continued to surge, with it now having 400 million daily Stories users and WhatsApp Status now having 450 million. Combined, Facebook has over 1.1 billion daily (duplicated) Stories users across its family of apps. That reach could make it tough for Snap to compete for ad dollars. And with its user count actually decreasing, that could make for a grim future for the teen sensation.
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