As Snap becomes a big-tech teenager, its CEO Evan Spiegel makes the unusual move to publish an internal note, sent to all Snap Inc staff, that is incredibly transparent about Snap Inc.’s recent achievements, challenges, and future goals, highlighting the company’s efforts to return to growth after years of revenue decline.
In his note, there are a number of key takeaways:
Business Turnaround Success: Over the past year, Snap Inc. successfully reversed two years of declining revenue, leading to improved earnings and cash flow. The company has reached over 850 million users, with a 25% increase in global content consumption. The goal for the coming year is to ensure the sustainability of this progress while accelerating revenue growth through both its advertising business and Snapchat+ subscription service.
Advertising Business Evolution: While Snap’s overall revenue growth lags behind competitors, the company is seeing success in diversifying its advertiser base, particularly by focusing on small- and medium-sized businesses. This shift toward lower funnel, direct-response advertising, which is more stable and predictable, is critical for long-term growth. Despite the slow growth of upper-funnel brand advertising, Snap is seeing notable increases in direct-response revenue.
Innovation in Ad Placements: Snap plans to continue evolving its advertising offerings to stay competitive in the crowded digital advertising market. New ad formats, such as Sponsored Snaps and Promoted Places, are being introduced, leveraging Snap’s unique features like Snap Map and Lens interactions. These innovations aim to create more personalised and impactful advertising experiences for users.
Generative AI and Machine Learning Investments: Snap is heavily investing in machine learning (ML) and generative AI to enhance its advertising and product experiences. AI-powered lenses are already popular on the platform, and further advancements are expected to improve personalization, ad placements, and engagement. Additionally, AI will play a critical role in scaling content moderation to maintain user safety and privacy.
Content Strategy and Simplification: Snap is refining its content experience by combining Stories and Spotlight into one seamless interface. This change is intended to improve discoverability and accessibility while boosting content consumption. Snap is also working to simplify the platform and make it faster, particularly for creators, with new tools aimed at helping creators and brands collaborate more effectively.
Focus on Well-Being and Safety: Snap differentiates itself from other social media platforms by focusing on positive user engagement. Recent studies show that Snapchat positively impacts well-being and friendship closeness, with no significant negative effects on self-esteem, unlike other platforms like TikTok and Instagram. Snap continues to invest in trust and safety measures to ensure a positive user experience.
Augmented Reality and Long-Term Vision: Snap’s long-term vision includes the development of augmented reality (AR) glasses, aiming to transform how people interact with the world. This is part of a broader strategy to create new market opportunities in AR, distinguishing Snap from competitors in both digital advertising and AR technology.
Why is this important?
Snap Inc. has seen a revival in recent years in popularity and revenue, and even with the refreshing level of honesty from its CEO about the challenges it has and continues to face, the platform appears poised to continue its growth trajectory by focusing on sustainable advertising strategies, product innovation, and long-term AR developments. One to watch in the coming 12 months.