Snap tries to win back investors

I’m writing to you from the westside of Los Angeles, where I spent this morning at Snap HQ hearing company executives make their annual pitch to investors. It was great seeing some of you there in person.

In today’s edition: I dig into Snap’s challenges and tease one of its coming announcements. Plus, notes on the generative AI mania, Twitter’s desperation, and notable people moves.

Toward the end of Snap’s Investor Day presentation this morning, during the Q&A portion with analysts and management, LightShed’s Rich Greenfield asked a zinger: “Why should investors have faith in the plan you all laid out today?”

CEO Evan Spiegel and other executives had just spent the last two hours walking through the state of Snapchat, sharing updated user growth stats, rearticulating the company’s vision for AR, and the like. After the nervous laughter in the room subsided, Spiegel demurred. “There aren’t a lot of independent internet companies that benefit from the scale we’ve reached,” he said before giving the expected CEO answer of being “excited” about the future.

His point about scale is right. As a product, Snapchat has defied the odds and managed to keep growing. Spiegel announced today that the app now has 750 million monthly active users, making it larger than Twitter, Telegram, and Pinterest.

“These guys have always had more ambition than the world gives them credit for,” a longtime investor in the company told me during a coffee break. “The app is doing well,” said an analyst in attendance when I asked for his reaction to the presentation. “The problem is that the market doesn’t care.” (Snap’s stock price declined more than 4 percent today.)

As I watched Spiegel and co. present, the disconnect became more obvious. For all the success Snap is having in growing its user base, the future of its business remains as uncertain as ever. Back in 2021, when the stock price was in the $60 range, Snap was predicting more than 50 percent yearly growth for multiple years.

There were no such financial projections today. Apple’s ad tracking changes clearly hurt its ads business more than expected. Meanwhile, efforts to monetize large swaths of the Snapchat experience, including its TikTok rival called Spotlight, are still nascent, and the core chat experience remains totally unmonetized.

A bright spot is the growth of Snapchat Plus, the company’s $3.99-a-month subscription that unlocks additional features in the app. There are now over 2.5 million paying Snapchat Plus subscribers, Spiegel said today. Achieving that number in barely seven months is impressive. But according to a memo Spiegel wrote to employees that I published on The Verge last September, the company’s goal was to reach 4 million subscribers by the end of 2022.

Other revenue streams are coming soon. I’m told that Snap plans to unveil its AR-for-enterprise effort led by Jill Popelka at its annual developer summit in April or possibly sooner. The idea is for apparel brands to use Snap’s virtual try-on tech and 3D asset management to facilitate AR shopping on their sites. In his memo to employees from last September, Spiegel said the goal is to “integrate with at least 5 paying customers in 2023.”

Going into this year, Snap has made some tough but necessary calls, namely laying off 20 percent of its workforce. It has quietly stopped calling itself a “camera company” — a tagline dating back to the IPO that has consistently confused people — and seems intent on doing what it takes to win back investors. Now, execution is all that matters.

That’s all for this week! As always, if you liked what you read, please forward it to a friend.

I’ll be back next Thursday with another edition. In the meantime, if you have any feedback or ideas for stories I should be looking into, let me know. Thanks for subscribing.