Headwinds And Face Wins<\/h2>\n
It\u2019s warranted. The Q3 earnings report was a blood bath<\/a> with Snap\u2019s share price down 18 percent.\u00a0User growth slowed to a 2.9 percent crawl. Revenue fell $30 million short. $40 million of Spectacles sit unsold. The company lost another $443 million. And the head of engineering just bailed.<\/p>\n On the outside, Snapchat Stories clones WhatsApp Status and Instagram Stories now have 300 million daily users<\/a> each. Snap\u2019s whole app has just 178 million. Instagram now has its own augmented reality face filters.\u00a0Facebook is pushing its own Stories feature hard. Facebook Messenger has become ubiquitious with 1.3 billion users. And Facebook is willing to buy any startup that gives it an edge with teens, like its new acquisition tbh<\/a>.<\/p>\n Netflix and YouTube keep getting better at original premium video. Creators and influencers want money, not just audience, so they\u2019re turning to Patreon<\/a>. More details keep emerging about Apple\u2019s AR glasses<\/a> that could trounce ones Snap makes. And Snap\u2019s sagging share price makes it harder to convince startups to sell to it.<\/p>\n \u201cKeep on keeping on\u201d is no longer a viable strategy for Snap, and Spiegel knows it. After reinventing messaging and social media with ephemerality, now he has to reinvent Snapchat. The product. The user base. The philosophy.<\/p>\n Here are the big flip-flops Snapchat is planning:<\/p>\n Before:<\/strong> Snapchat spent years shunning social media influencers despite huge interest from these creators. A week after Snapchat Stories launched in 2013 I wrote \u201cWho\u2019s going to be the first Snapchat Stories Celebrity?\u201d<\/a>\u00a0But the company denied influencers like Mplatco<\/a> official ways to monetize, provided weak analytics on viewers, ignored their requests, refused help with account lock-outs, and only started verifying their accounts<\/a> like real celebrities in August. Many Snapchatters eventually left<\/a> for YouTube and Patreon where they could earn money directly.<\/p>\n \u201cSnapchat is a close friends network, making ads more influential and interactions more meaningful\u201d the company wrote on its For Business blog<\/a>. \u201cP<\/span>ersonal, one-to-one Snaps sent directly to friends are what make Snapchat a close friend network \u2014 not a broadcast network<\/span> for reaching the largest number of people\u201d it explains.<\/span><\/p>\n Now:<\/strong> Spiegel announced on the Q3 earnings call<\/a> that shunning creators was a mistake, and it needs them to keep viewers coming back. \u201cWe have historically neglected the creator community<\/span> on Snapchat . . . In 2018, we are going to build more distribution and monetization opportunities for these creators . . . Developing this ecosystem will allow artists to transition more easily from communicating with friends to creating Stories for a broader audience, monetizing their Stories, and potentially using our professional tools to create premium content.\u201d The question is if it\u2019s too late to lure creators back to an app with sluggish user growth.<\/p>\n Before:<\/strong> Snap relies on high-bandwidth video that doesn\u2019t load as well in the developing world, where ads also command lower rates. But rather than embrace the engineering challenge of improving load times, shift the product to focus on photos in these regions, or commit to building ad value and prices, Snap largely abandoned the Rest Of World market. That ignores the network effect Snapchat needs to survive, and cedes the developing world to Instagram where its feed is already popular.<\/p>\n In its\u00a0February IPO filing<\/a>, Snap wrote \u201cWe expect growth to continue to come from developed markets<\/span> with readily available high-speed cellular internet and high-end mobile devices\u201d and on the Q1 call<\/a> Spiegel said \u201cH<\/span>istorically we\u2019ve really focused our efforts on markets where both of those are available.\u201d<\/span><\/p>\n Snap\u2019s average revenue per user increased just one cent from $0.29 to $0.30 in the Rest Of World this quarter. Though the company disputes the claim, Snapchat is being sued<\/a> by a former employee who stirred controversy by accusing Spiegel of saying \u201cThis app is only for rich people. I don\u2019t want to expand into poor countries like India and Spain.\u201d<\/span><\/p>\n Snap also admitted in its IPO filing that \u201calthough our products work with Android mobile devices, we have prioritized development of our products to operate with iOS\u201d because that\u2019s where its early users were. But by Q1 Spiegel was saying \u201cOverall, especially in the last half of last year, we had a really tough time with Android\u201d, blaming sign-up flow bugs for slowed user growth.<\/span><\/p>\n Now:<\/strong> Snap finally acknowledges that it needs to enhance its network effect and lay foundation for the future by winning users everywhere on every device despite the challenges. It\u2019s also starting to play videos before they\u2019re fully loaded and may seek zero-rating deals for free data use on certain networks.<\/p>\n On the Q3 call Spiegel said\u00a0\u201cin order to further scale our user base, we need to accelerate the adoption of our product among Android users . . . and users in the Rest of World markets<\/span>. We are taking action both internally and externally to improve connectivity for our community. Internally, we are focused on product improvements like our new streaming architecture for Story playback . . . Externally, we are exploring partnerships with select wireless carriers who can help us to provide our service at a lower cost to our community.\u201d And \u201cto attract more Android users, we are building a new version of our Android application from the ground up.\u201d But many of these users have already been burned by poor Snapchat app performance.<\/p>\n TechCrunch\u2019s Josh Constine using Snapchat\u2019s senior citizen face filter<\/p>\n Before:<\/strong> Snapchat has viewed itself as a cool app for teens that could be turned off if adults signed up, even though this discludes a massive potential audience. It proudly didn\u2019t label its buttons, leading confused adults to abandon the app after install.<\/p>\n On the Q1 earnings call, Spiegel said \u201cW<\/span>e do tend to market our products directly to younger people<\/span> because, frankly, they are more interested in learning how to use new technology products. And that\u2019s sort of \u2013 is partly inspired by trying to teach my grandma how to use email; and she\u2019d really prefer to just talk on the phone . . .\u00a0<\/span>And so I think, over time, that strategy has worked for us.\u201d<\/span><\/p>\n Now:<\/strong> Snapchat seems to have suddenly woken up to the fact that its plummeting daily active user growth per quarter (once over 17 percent before Instagram Stories launched, now a weak 2.9 percent) is exacerbated by it avoiding adults. On the Q3 earnings call, Spiegel said \u201cIn order to further scale our user base, we need to accelerate the adoption of our product among . . . users above the age of 34.<\/span>\u00a0This means that we will have to make some changes to our product and business.\u201d Gracefully, coordinating this shift without scaring off loyalists will be a huge challenge.<\/p>\n Before:<\/strong> Snap actually thought having a confusing interface was a value-add because it made the it viral amongst school kids who\u2019d show each other the tricks to using the app. Adults in particular had a hard time understanding the app, leaving them vulnerable to competitor Instagram that built a more obvious Stories interface and that already had an easy-to-use feed that\u2019s popular with adults.<\/p>\n In the IPO filing, Snap wrote \u201cEven when we have the right solution, it\u2019s often in the form of a new product that might take a while for our community to learn how to use. Just because products are sometimes confusing when they\u2019re new doesn\u2019t mean we are going to stop building innovative products for our community<\/span>. . .\u00a0These new behaviors . . . are not always intuitive to users . . to date, this has not hindered our user growth or engagement, but that may be the result of a large portion of our user base being in a younger demographic and more willing to invest the time to learn to use our products most effectively.\u201d<\/span><\/p>\n Snapchat\u2019s app is so confusing, it had to put a diagram of the interface in its IPO filing<\/p>\n Now:<\/strong> With Snap desperate for growth, it\u2019s going to risk alienating existing users with a massive design overhaul. Rather than gradually simplifying the interface over the years, the usability problem now requires drastic action, which is both commendably bold but also more dangerous. This is why Facebook avoids backlash by only changing design elements slowly and steadily.<\/p>\n On the Q3 call, Spiegel said \u201cOne thing that we have heard over the years is that Snapchat is difficult to understand or hard to use<\/span>, and our team has been working on responding to this feedback. As a result, we are currently redesigning our application to make it easier to use<\/span>. There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term, and we don\u2019t yet know how the behavior of our community will change when they begin to use our updated application. We\u2019re willing to take that risk for what we believe are substantial long-term benefits to our business.\u201d<\/p>\n Before: Snapchat at first succeeded by being the opposite of Facebook, with content that disappeared instead of lasting forever. But a source close to Snap Inc tells me Spiegel\u2019s anti-Facebook orthodoxy kept him from embracing a News Feed-style algorithmically relevance-sorted feed, even as Instagram and Twitter saw engagement improve after adopting this curational method. Instagram Stories shows the people you\u2019re most likely to watch first, and that\u2019s led it to 300 million daily active users \u2014 dwarfing the 178 million of the app it cloned<\/a>.<\/p>\n Snapchat has always ranked its Stories list purely by which of your friends posted most recently<\/span>. That\u2019s useful if you want to read the pulse of where friends are right now. But as people\u2019s Snapchat social graphs grow, this sorting buries your best friends and favorite content creators in favor of constant oversharers. Plus Snap now has Snap Map for real-time location. I wrote a piece in April about how \u201cSnapchat is stifled by its un-algorithmic feed<\/a>\u201c, advocating for at least adding a relevancy-sorted tab or a section of your favorite people to watch at the top.<\/p>\n Now:<\/strong> Snap has realized that sorting its content to show the most engaging stuff first is its best chance to revive user growth.<\/p>\n On the Q3 call, Spiegel announced a personalization effort, saying \u201cWe are going to make it easier to discover the vast quantity of content on our platform that goes undiscovered or unseen every day. We are developing a new solution that provides each of our 178 million Daily Active Users with their own Stories experience<\/span>, leveraging the tremendous benefits of machine learning without compromising the editorial integrity of the Stories platform that we have worked so hard to build . . . We hope that showing the right Stories to the right audience will help grow engagement and monetization for our partners and for Snapchat.\u201d<\/p>\n According to a source speaking to Business Insider<\/a>, Snapchat is planning to launch this new design around December 4th that puts all messages and Stories from friends to the left of the camera, and all celebrity, publisher, search, and Snap Map content to the right. \u201cSnap will use algorithms to personalize the \u2018endless\u2019 feed of videos to the right of the camera\u201d Alex Heath writes. The question is whether Snap will also algorithmically sort Stories from friends, which could go a long way to making the app more enjoyable for new users.<\/p>\n Before:<\/strong> Spiegel\u2019s strategy has always been to go with his instincts over data, and try to surprise people rather than foreshadowing Snap\u2019s movements or publicly beta testing products<\/span>, sources close to Snap have told me in the past. While Facebook rigorously A\/B tests features on segments of its user base and implements what boosts engagement, Spiegel has preferred to trust his gut. That\u2019s what led to ephemeral messaging and Stories, after all. But as Snap scales, that strategy is wearing thin.<\/p>\n Spiegel initially refused to accept there was a user growth problem caused by Instagram\u2019s competition despite the evidence, sources told The Information<\/a>. He eliminated the Auto-Advance feature that made watching Stories easier without any data showing that would help growth.\u00a0<\/span>\u201cWhile not all of our investments will pay off in the long run, we are willing to take risks in an attempt to create the best and most differentiated products on the market\u201d Snap wrote in the IPO filing. And on the Q1 call, Spiegel confidently joked that\u00a0<\/span>\u201cWe\u2019re kind of famous for not giving guidance on the product pipeline\u201d.<\/span><\/p>\n Karl Lagerfeld\u2019s photo of Snap CEO Evan Spiegel donning Spectacles for their September 2016 reveal<\/p>\n Now:<\/strong> Spiegel spent most of the Q3 call\u2026giving guidance on the product pipeline, as noted throughout this article. \u201c2018 promises to be a productive and exciting year for Snap, with many changes coming to our products and platform\u201d he explained.<\/p>\n To pull off such a broad flip-flop of strategy, Spiegel will have to learn to trust the data alongside his instincts, test products widely to avoid a disastrous misstep with the redesign, and communicate with the world to boost confidence while Snap\u2019s share price sags. As early shareholders sell, Spiegel is slated<\/a> to gain sole control of the company, and that leaves investors to only be able to vote with their wallets. They have to believe in Spiegel\u2019s newly plotted course. And navigating it will take as much a reimagining of the company\u2019s philosophy as its app.<\/p>\n![\"\"](\"https:\/\/i0.wp.com\/rsoftsolution.com\/blog\/wp-content\/plugins\/RSSPoster_PRO\/cache\/7a3c6_snap-chart-dau-17q3a1.png?resize=640%2C332&ssl=1\")
<\/p>\nInfluencers<\/h2>\n
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<\/p>\nThe Developing World\/Android<\/h2>\n
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<\/p>\nAdults<\/h2>\n
![\"\"](\"https:\/\/i0.wp.com\/rsoftsolution.com\/blog\/wp-content\/plugins\/RSSPoster_PRO\/cache\/a9377_snapchat-lenses.png?resize=320%2C516&ssl=1\")
<\/p>\nUsability<\/h2>\n
![\"\"](\"https:\/\/i0.wp.com\/rsoftsolution.com\/blog\/wp-content\/plugins\/RSSPoster_PRO\/cache\/25242_snapchat-interface.png?resize=640%2C557&ssl=1\")
<\/p>\nAlgorithmic Feed<\/h2>\n
![\"\"](\"https:\/\/i0.wp.com\/rsoftsolution.com\/blog\/wp-content\/plugins\/RSSPoster_PRO\/cache\/b7854_snapchat-algorithmic-feed.png?resize=640%2C365&ssl=1\")
<\/p>\nPhilosophy<\/h2>\n
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<\/p>\n