It’s Snap versus the world

It has been, needless to say, a rough week for Snap.

The pain started Monday, with the announcement of layoffs impacting 10 percent of employees. On Tuesday, the company reported weak earnings that sent the stock price tanking 30 percent. You could hear the solemness in CEO Evan Spiegel’s voice on the earnings call, which lasted an unusually brisk 30 minutes.

As I wrote in an October issue, the question of what happens to Snap remains a big one that many inside and around the company are wrestling with. On one hand, Snapchat has achieved a reach — 414 million daily users last quarter — that is rivaled only by a handful of other companies in the world. On the other, as the team at the investing research firm MoffettNathanson put it this week, “It is hard to see how Snap’s competitive position and financial profile gets materially better.”

Snap has fascinated me for years, in part because of how Spiegel has positioned it against the rest of social media. That approach will be on display again this weekend during the Super Bowl, when the company’s “less social media, more Snapchat” ad will air.

There are other ways Snap is acting differently from everyone else. Spiegel is still spending hundreds of millions of dollars per year on the hardware division making Spectacles, I’m told. The plan is to release another pair of the AR glasses either later this year or in 2025. Meanwhile, the much bigger players in this space, namely Apple and Meta, don’t see true AR glasses really hitting until toward the end of this decade. Google just decided to kill its first-party AR hardware because the technology was too far out from being commercially viable.

Even still, Spiegel sees building AR glasses as being existential. “We need our business to be strong enough and profitable enough to deliver the future of computing in augmented reality,” he told employees last month. He’s not alone in thinking AR will be the next platform shift. He just looks increasingly outgunned.

On the business side, he seems set on the idea that increasing revenue growth will appease investors and lift his stock price, though he has yet to prove it. The tech companies performing the best right now are focusing on the bottom line, and Snap is nowhere near being close to actual profitability.

Even if the ads business gets turned around and starts growing again, more revenue by itself is a hard pitch when Meta is growing revenue faster at a much larger scale and also producing a lot of profit. (A wild stat: Snap’s stock-based compensation last year was 29 percent of its revenue. Meta’s was 10 percent.)

Back when interest rates were low and he was the de facto head of product for Mark Zuckerberg, Spiegel could get away with Snap being the underdog, money-losing operation. Now, he’s playing catch-up on generative AI and is late to flattening his org chart. Who is copying whom, exactly?

Morale inside public companies tends to trend with the stock price, and Snap has certainly been a rollercoaster since it went public. But after the events of this week, the question is whether Spiegel can convince others to stay on the ride with him.

My thoughts on what else is happening in tech right now:

Some interesting career moves I’ve noticed recently:

That’s it for this issue.

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