What’s behind Snap’s big AI bet

Happy Twitter Checkmark Extinction Day to everyone except LeBron James, William Shatner, and Stephen King. What a hilarious disaster.

I spent yesterday at Snap’s annual conference here in Los Angeles mingling with company employees, partners, creators, and the like. More on that below. I also have new details from inside Meta after its second big round of layoffs this week, including how CEO Mark Zuckerberg handled employees who are upset about executive pay.

Snap’s IPO in 2017 felt like a seminal moment for social media. Finally, Facebook had a challenger with the vision that Twitter has always lacked.

We all know how things went. Snap’s journey as a public company has been rocky, to say the least. It continues to add interesting features and now has 750 million monthly users — an impressive feat for what many in the media initially wrote off as nothing more than a sexting app. Snap remains a leader in AR usage and a product R&D factory for the rest of the industry, seeing around corners before its competitors can get there.

Financially, though, Snap’s fate is as uncertain as ever, even after laying off 20 percent of its employees last year. The stock was trading below its IPO price as I was driving across town yesterday to a glammed up airport hanger in Santa Monica for the company’s second in-person Partner Summit. As I chatted with attendees throughout the day, there was an undercurrent of uncertainty about where the company is headed. Not because Snap isn’t still doing creative, weird things, but because no one seems to be sure when and how the business will rebound.

Meanwhile, in its quest for more dollars, the company is broadening from its original mission of ephemeral messaging between friends and family. It’s setting up an enterprise division to sell AR try-on software to apparel companies like Nike. It’s trying to take on TikTok and convince creators to invest in the platform. A subscription tier for power users is growing, albeit not quite as quickly as the company had hoped. Can one social network be all things to everyone? It’s a lot to thread together in a way that clicks.

“People are exhausted by the social media popularity contest,” CEO Evan Spiegel told the packed room at the beginning of his opening keynote. A few minutes later, updates to Snapchat’s creator program were announced: accounts with 50,000-plus followers, 25 million monthly views, and at least 10 stories per month can qualify.

Spiegel has long maintained that this duality can exist because of how Snapchat is designed: chats with friends are sequestered in one tab while public content from creators is in another. At the same time, Snap is under pressure to finally become profitable, and ads remain the only proven method for a social network of its size. The age-old problem, as employees throughout the company have told me over the years, is that the main reason people use Snapchat — to chat — isn’t monetized.

Enter My AI. Spiegel announced onstage that the OpenAI-powered chatbot is being made available to all Snapchat users for free. (You can read my interview with him about that on The Verge.) It’s a big bet on a new technology that could have potentially disastrous reputational damage for a company like Snap, though the danger is certainly less than it would be for much larger, scrutinized names like Google and Meta.

Regardless of what blowback may or may not come, it’s clear that Spiegel sees My AI as a potential boon to Snap’s business, though so far he has been cagey about the plan to monetize it. While we wait for the unveiling, it’s pretty easy to see My AI hooking into Snap’s ads system. If I ask it to help me plan a trip to Japan, I certainly wouldn’t mind seeing an ad for a cool hotel in Tokyo while I’m swiping through videos in Spotlight. Sponsored responses from My AI are another obvious revenue stream, which Bing is already experimenting with. (Snap’s new head of sales for the Americas, Rob Wilk, ran Microsoft’s ads business previously.)

If My AI can help Snap finally monetize the most used part of its app, it will be another feather in the cap for Spiegel at a time when he needs a new hit. And if generative AI chatbots prove to eventually become a passing fad, it’s unclear how the most used part of Snapchat will make the company money.

On a semi-related note, at the end of our interview earlier this week, I asked Spiegel why the company quietly dropped its “camera company” marketing tagline, which was the centerpiece of its IPO narrative, and is now calling itself a generic “technology company.”

Here’s what he told me: “Our efforts have just broadened so significantly. If you look at our AR platform, for example, and all the places where AR is showing up in peoples’ lives, and increasingly the different components of our platform, we felt that even though we open into the camera and the camera is at the heart of everything we do, that at this point our efforts extend beyond the camera and into technology more broadly.”

My take: Snap has realized that calling itself a camera company never made sense to people. Sometimes it’s OK to just embrace what you are, even if it’s a little more boring.

In one of the worst-timed SEC filings in corporate history, Meta revealed the 2022 compensation for its senior leadership this week. The filing dropped as an additional 4,000 employees were being laid off.

The revelation that top executives earned at least 125 percent of their individual performance bonus multipliers for 2022 — the same year that the stock price cratered and revenue growth was negative for the first time — didn’t sit well with the rank and file. Meanwhile, the company’s overall bonus multiplier, which is factored into an equation alongside the individual multiplier to determine the total bonus each employee receives, was the lowest in years at 85 percent.

During an internal Q&A with employees earlier today, Zuckerberg addressed the discrepancy, according to a partial transcript of his remarks I obtained. “A lot of the top folks at the company took on new and much bigger and expanded roles in the last year, and I think are doing quite well at them,” he said, referencing promotions like Andrew Bosworth’s to CTO. “So I think it’s somewhat difficult to kind of pin the company’s performance on people who weren’t necessarily in those roles before.”

He stressed that the company multiplier applied to execs as well and that not all of the senior leadership team has their compensation reported to the SEC, which is true, though it didn’t do much to calm down employees watching the Q&A. Immediately after Zuckerberg’s comments, the line “executive performance = company performance” was pasted repeatedly by employees in the chat box underneath the video livestream.

Some more notes from Zuckerberg’s Q&A and what I’ve heard about the teams hit by this latest round of layoffs:

That’s it for this week. I’ll be back next Thursday. In the meantime, if you have any feedback on this edition, I’d love to feature your commentary next week. Thanks for subscribing.