Snapchat parent Snap became the latest tech company to announce major layoffs yesterday, confirming rumors that it is cutting 20% of its global workforce, at least 1,200 jobs.
The reasons behind Snap’s big stretch-back exercise are clear, given the same economic reasons countless other businesses have laid off workers this year — the company says the cuts could save $500 million a year in costs. The markets also seemed to like the news, with Snap shares jumping as much as 15% at one point yesterday when it announced the termination, before settling around 9% from the previous day’s closing price.
While mass restructurings get the lion’s share of the headlines, buried in the news is Snap’s plans to cut costs by “refocusing” its business, which includes cutting investments in certain products. Part of that involved spinning off two standalone apps, one of which was Zenly, a social mapping app that raised north of $200 million five years ago. The entire Zenli team was laid off, while their non-compete clauses were thrown out.
While it’s not uncommon for companies to shut down apps after years of service, especially during cost-cutting “restructuring” efforts, Zenli’s decision to completely shut down is surprising given that it’s still a hugely popular app in its own right. If it sits in the shadow of Snapchat and does not generate much direct income.
There’s a map for that.
Founded in Paris in 2011, Zenli raised $35 million in funding before Snap (then known as Snapchat) entered the mega-million dollar auction. In short, Zenli developed an app that allows users to see where friends are on a map and connect with each other.
But Zenli is not just a utility. It can be described as a social app that revolves around a map. When you open the app, you will see a map with all your friends. If you see multiple friends hanging out together, you can send messages and request photos so you can see what they’re up to. While many “social” apps encourage you to stay in bed and scroll, Zenli encourages you to connect with your friends and spend more time with them.
Screenshot of Zenli
Zenly has continued to operate as an independent entity since the acquisition, and it’s easy to forget that Zenly is owned by Snap, the core development team is still based out of Paris, and there’s no obvious Snap branding anywhere on the Zenly app or website.
A few months ago, Zenly released a major update that added several new features, including the ability to search for locations. Users can pin places like favorite bars, restaurants, gyms, libraries, shops and more to their “world”. This app represents Zenly’s biggest update in years, becoming a sort of modern forum square – users can find places based on where their friends go. When Zenly released the app update, co-founder and CEO Antoine Martin announced that he was leaving the company, with Snap CEO Evan Spiegel stepping into the role.
And a month later, Zenli announced that it was taking on the mighty Google and Apple by introducing its own map data and engine, the result of a gargantuan project that began three years ago.
Zenli’s new maps
So Zenli showed no signs of slowing down, and if anything, it looks like it has the potential to become one of Snap’s most valuable assets if it figures out how to turn it into a money-making machine.
And the data seems to back this up – Zenly claimed about 35 million monthly active users earlier this year. Additional figures from Data.ai provided to TechCrunch for this story tell us that Zenly has seen nearly 160 million downloads on Android and iOS since its inception, 3 million of which came in the last month alone.
While Data.ai’s numbers show that Zenly is regularly one of the top 20 most-installed social apps globally, digging deeper into market-specific metrics shows that it outperforms every other social app. For example, in Japan Zenli is mainly found in 5 or 10 apps, but as this iOS chart on August 19 shows, it rises to the pole position ahead of Facebook, WhatsApp, Discord and the domestic market leader.
The Zenli iPhone will be released in Japan on August 19, 2022
Elsewhere, Zenli is a frequent top-five social app in Russia and Belarus, a top-ten social app in France, Indonesia and Thailand, and hovers on app charts in several other global markets.
Of course, other growing social apps like TikTok and BeReal are leading the charge in Snap’s core target markets, including the US, which may be partly because Snap is less enamored by Zenli’s enduring popularity elsewhere. But still, a well-placed source told TechCrunch that Zenli has grown its user numbers quarter-on-quarter since the acquisition, and there’s little evidence that trend will stop anytime soon — and that’s difficult. Ignore it.
Quick decision
So why did Snap choose to pull the plug on Zenli instead of trying to feed off its popularity in major markets in Europe and Asia? And why not sell the app to another company that does something useful with it? There’s a hint in Snap’s own words from yesterday’s announcement. In an SEC filing, the company said it was downsizing Zenly to “focus on Snap Map,” a location-focused social product it launched back in 2017.
While Snap Map isn’t built directly on Zenli’s technology, it’s easy to see why having two location-based social products is considered unnecessary, especially when one of them needs to be funded as a standalone product outside of the main Snapchat client.
A Snap spokesperson told TechCrunch: “Going forward, we will focus our mapping efforts on one service, Snap Map within Snapchat. Thank you.” [Zenly] team for their contributions, and the Zenli community for their support.
This suggests that Snap won’t be abandoning the social map, which means selling Zenly to a third party would be unwise from a competitive standpoint. Snap confirmed this reason to TechCrunch that it has invested heavily in Zenli since 2017, doubling the size of the team in the process, and ultimately not finding a way to generate meaningful revenue. Additionally, given the continued focus on Snap Map, the company said it would not be in Snap’s strategic interest to let Zenli fall into the hands of another company.
It may not be a stretch to say that Zenli’s popularity can be contradicted here – any company He did Deciding to buy Zenli will have a significant baked-in global community to build from the get-go. The risks here were ultimately too great for Snap.
Internally, Snap says Snap Maps has more than 300 million monthly active users, each of whom has the potential to connect with 30 million businesses listed in the app — many of whom pay to promote their listings. As an aside, though, it’s not clear how many of these active users have mapping and location features — many simply use Snap Map to see when their friends have been online.
Snap map businesses
In conclusion, Snap thinks it has the whole map/location thing covered in Snapchat, doesn’t have the cash flow to continue Zenly’s growth, and isn’t prepared to let another company take over to protect itself. Business needs.
Other deductions
In the year Voisey’s UK startup Snap, acquired in 2020 for an undisclosed amount and now discontinued on September 5, suffered a similar fate. — described as something akin to “TikTok for music innovation” — makes way for Snap to focus entirely on audio, with the music feature that debuted in Snapchat two years ago.
Elsewhere, Snap confirmed that it is disinvesting in several features and services, including Snap Originals and Minis. And Snap only announced in April that its Pixy mini-drone project is also going the way of the dodo, as reports a few weeks ago suggested.
This helps highlight how quickly the wave turned to Snap. In the space of four months, Pixy has gone from an exciting (if troubling) new hardware project to dead in the water, while Zenli has gone from the crest of a storm to the brink of extinction.
We saw some of this coming. Snap’s active users may continue to grow, but this is not reflected in its financial performance, which is largely due to the current economic climate. In its Q2 earnings call in July, Snap wrote to investors:
While the continued growth of our community adds long-term opportunity to our business, our financial results for Q2 do not reflect the scope of our goals. Regardless of the current headwind, we are not satisfied with the results we are delivering.
On top of that, Snap said it will reduce operating costs and reduce hiring during the period. The company declined to provide any guidance on its future financial performance due to “uncertainties related to its operating environment.”
So it is expected that we will see that there are people affected by all this. But it’s still a sad story in every way, at least for those directly affected by the reduction.
While Zenli may have slipped under many people’s radars—especially in the US, where there are relatively few users—it’s undoubtedly a major European success story. Zenli inspired new European entrepreneurs, had a major impact on the French tech ecosystem, and strengthened Snap’s reputation in France. Zenli’s founders proved that it is possible to build a European social app with tens of millions of users – and BeReal shows that this is still possible today.
In the right environment, Zenli could have gone on to great things, so his sudden and untimely death was a huge disaster.
