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

While Facebook, YouTube, and Twitter are making headlines and testifying before Congress, Snapchat has spent the last decade quietly establishing itself as the youth’s favorite social media app. According to some analysts, five years ago when Facebook copied Instagram’s signature photo feature, Stories, Snapchat instead grew by bringing in a new player. Main characteristics.

until now. The recession, the seismic changes in the digital advertising market and the meteoric rise of Tik Tok left Snap behind once and for all, and in On August 31, it laid off 20 percent of its workforce. An internal memo from CEO Evan Spiegel, first obtained by The Verge on Wednesday and published by The Post, acknowledged that the company is on track to significantly miss its 2022 internal growth target. About three-quarters of the price.

Now a fledgling in the social media world, Snap faces a new challenge as it enters its second decade: How to build a mature and profitable business around an app that is loved by teenagers but largely ignored by adults with disposable income. A company that prides itself on being the anti-Facebook, known for its bright culture and impressive product initiatives, is now scaling back its ambitions and stressing out employees as it struggles to tap into those young eyeballs in the face of its revenue model. From Apple and TikTok.

“I think it’s a perfect storm,” said Dan Ives, a financial services analyst at Wedbush Securities. TikTok is tapping into Snap’s demographic, online advertisers are spending less, and Apple’s move to limit the data it can collect from iPhone users is “guts to its business model,” he said. Snap has always struggled to turn its popularity into profits, and that’s only getting harder because of the “huge headwinds” in the digital ad market.

It adds up to a reversal of fortune for a company that has been quietly thriving. Following a failed 2018 redesign that sent celebs like Kylie Jenner to rival Instagram, Snapchat has regained its footing thanks to an overhaul of its previously-struggling Android app, improved advertising tools and interest in social media’s epidemic of lockdowns. It has also developed new features to indulge itself in the daily activities of its young users.

In a statement, Snap communications chief Julie Henderson attributed the company’s layoffs and stock slide to a “difficult macro environment,” noting that the company is still adding users and growing revenue faster than many rivals. While Snap is “fundamentally strong,” she said, “we’ve had to make tough decisions to better position our business for the future.”

Quickly cut 20% of staff as ad sales dry up

As Instagram’s user base ages and expands and its algorithm feeds more influencers, Snapchat has cemented its reputation among teenagers as a private and spontaneous way to communicate outside the eyes of parents and teachers. Kids share their location using Snap Maps to organize impromptu parties and send Snapchat streaks or a series of dates with best friends. Snap has made key strategic partnerships to integrate its technology and AR features with companies such as dating app Bumble, Ticketmaster and Disney.

Snap has avoided many of the content-editing scandals that have rocked Facebook and other rivals, eschewing algorithmic recommendations in favor of the human editing controls highlighted in the app. It went hard into features meant to make messages more fun, like digital filters that can make you look like a baby or an animal, or swap facial expressions with a friend. (Some of those filters have sparked their own controversy.)

Snapchat’s active user base has grown to 350 million people per day great Twitter, Pinterest and Reddit. In the year Meta was the fifth largest US social media platform by active users in 2022, behind Facebook, Instagram and WhatsApp, and Google’s YouTube. An April survey by Pew Research found that 59 percent of American teenagers use Snapchat, with 15 percent using it “almost constantly.”

And the future looks bright. In April, Snap reported that Facebook’s growth had slowed, but it was still adding millions of users. It turned a quarterly profit for the first time in its five-year history as a publicly traded company.

In the spirit of winning at its annual developer conference, the company continued its tradition of surprise hardware announcements with the Pixy, a $230 “selfie drone” that can take pictures and videos and post them on Snapchat.

Spiegel noted that augmented reality, or AR, is the future of consumer technology, contrasting it with Meta CEO Mark Zuckerberg’s “transformational” vision of virtual reality. Instead of donning a headset to escape the world, Snap envisions people sliding digital images over spherical augmented-reality glasses, called lenses, on their perception of the world around them.

Facebook is abandoning Friends and Family to compete with TikTok.

Meanwhile, Snap continues to invest in an empire of exciting experimental projects and products, from an in-house startup accelerator to a mobile game business to original short-form video shows to a magazine of high-minded ideas. Technology and society.

A quick and emotional three months evaporated, thanks to a gloomy earnings report and the first mass layoffs in the company’s history. The company cut about 1,300 jobs from its workforce of more than 5,000, including entire teams, and closed acquisitions such as its exclusive social mapping app Zenly.

As for a startup accelerator, game business, original programming and technology magazine? All are closed. Pixy drone: Discontinued.

Among the remaining ranks of the company, the feeling worsened, As current and former employees.

“Morale is very low,” said one Snap employee, who spoke on condition of anonymity to discuss company matters. They cited concerns about the new leadership, the “Amazonization” of the workplace – the use of unforgiving performance measures for rank-and-file employees – and the decline of the “kind” culture. (In August, Snap promoted former Amazon vice president Jerry Hunter to chief operating officer after the former head of business left for Netflix.)

“People are definitely not optimistic about Snapchat’s future,” the employee said. He also pointed out that some of his colleagues were disappointed that the layoffs included people on parental leave and employees who played a major role in the company’s diversity efforts.

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According to the company, the biggest reason is a pushback by digital advertisers due to the war in Ukraine, inflation and fears of an economic downturn — factors that also affect Snapchat’s rivals. Indeed, Facebook and Twitter have been tightening their belts in recent months in the face of declining revenue, and Google CEO Sundar Pichai said at a conference this week that it wants to make the business 20 percent more efficient.

But Snap’s stock has taken a hit, and some analysts believe the challenges are more serious than the economic downturn. Since 2018, TikTok, the Chinese-owned video app that launched in the United States, has grown exponentially. A Pew study found that more than just Instagram and Snapchat, American teenagers used social apps the most. YouTube.

While TikTok and Snapchat don’t serve the same functions, they’re competing for the same youth — and the same advertising dollars targeting that demographic, Wedbush analyst Ives said. According to analyst firm Insider Intelligence, half of Snapchat’s users are under the age of 25, despite the company’s long-term expansion efforts.

Some advertising headwinds are blowing straight down Highway 101 from Apple headquarters in Cupertino.

Last year, Apple introduced new privacy rules for apps like Facebook and Snapchat, curbing their ability to collect data for the purpose of targeted advertising. App developers were required to explicitly ask their users if they wanted their internet activity tracked.Requests from multiple users have been denied. Those changes have prompted Snap and other tech companies to repeatedly warn investors that the changes could affect their earnings.

While Snap executives are considering investing in new analytics tools for advertisers, the company is looking for other ways to make money.

Apple makes privacy changes, and Facebook and ad companies cry foul.

These include e-commerce, where retailers offer products for sale within the Snapchat app so users can “try on” makeup, clothes and other items in virtual reality, and a new subscription business called Snapchat+, which launched in June. For $3.99 a month, subscribers get exclusive badges and features in the app, and their responses to celebrities will be shown above non-subscriber responses.

In August, Snap said Snapchat+ had reached 1 million users; It plans to earn 4 million by the end of the year and 10 million next year, according to an internal Spiegel memo. He also said that he will continue his efforts to expand the user base, from Zummers to Millennials, who are currently in their thirties and forties.

Meanwhile, Snapchat has followed Instagram in testing its own TikTok-like video feature called Spotlight. It’s a change that threatens the reputation of a company that prides itself on being the one to improve upon innovations copied by others.

In a TV interview with CNBC this week, Spiegel said he believes the ad business will eventually recover, but that the company needs to “refocus our business” and demonstrate profitability in the meantime. “You know, creativity is about taking risks, and sometimes that means reinforcing the things we see as reality,” he said.

But Snap’s rate cuts and shutdown of testing initiatives could sacrifice some of its long-term growth potential, said Mark Shmulik, who covers U.S. Internet firms at Bernstein.

“It looks like they took a machete that would probably fit a knife,” Shmulik said.

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

“Now they’re facing one of those, call it ‘existential moments’ you know they’re making another pivot,” Shmulik said. “Every time you go through it, there’s always a new threat on the horizon, or the dynamics change, and somehow they persist.

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