WEBVTT - Alex Barinka on Snap (Audio)

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<v Speaker 1>Okay, we're having look at Snapchat and Snapchats parent company

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<v Speaker 1>sashing stuff, scaling back investments in struggling businesses, all in

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<v Speaker 1>an attempt to rain in costs following a slowdown and

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<v Speaker 1>add revenue growth. Let's get to the details on this

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<v Speaker 1>and other similar companies. Alex Sabrinka Social Media reported joins is, Alex,

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<v Speaker 1>what do you make of this? And you know how

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<v Speaker 1>struggling is this business? And is the business model here

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<v Speaker 1>wearing thin? Yeah? So I think that this is a

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<v Speaker 1>pretty big deal for this company and it's in a

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<v Speaker 1>really bad year currently. The shares are down to the

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<v Speaker 1>tune of seventy six percent for the year, so clearly

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<v Speaker 1>there are not a lot of votes of confidence that

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<v Speaker 1>they're after the right thing right now. So it's all

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<v Speaker 1>told in the news that came out Today's as you mentioned,

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<v Speaker 1>now is cutting its workforce. It's also killing a lot

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<v Speaker 1>of projects that are kind of ancillary to its core

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<v Speaker 1>Snapchat app. Um, there's a flying drone that takes pictures, Um,

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<v Speaker 1>it's snap original. These shows in series that produced, they're

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<v Speaker 1>basically culling anything and everything that is not in service

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<v Speaker 1>of expanding its ad sales or bringing on kind of new,

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<v Speaker 1>meaningful um revenue streams for the business. So did this

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<v Speaker 1>company become overly ambitious as a result of maybe a

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<v Speaker 1>spike in business during the pandemic. Did they become a

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<v Speaker 1>little self deluded. I don't know if self deluded. I

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<v Speaker 1>think it's part of the Snap DNA to kind of

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<v Speaker 1>create quirky new products and really see what works. The

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<v Speaker 1>problem with that is, you know, when investors expect those

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<v Speaker 1>products to turn into money winning opportunities. Um, if you

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<v Speaker 1>do see sales kind of take a huge decline like

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<v Speaker 1>they did this year, that becomes a problem. Snap is

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<v Speaker 1>in this interesting place where you know, they're competing for

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<v Speaker 1>dollar share from marketers budgets, against meta's, Facebook and Instagram,

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<v Speaker 1>against Google and YouTube, against all of these kind of

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<v Speaker 1>really big um competitors where advertise users can put their

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<v Speaker 1>dollars and have a really clear picture on the return

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<v Speaker 1>on investment of those dollars. Snaps add products are a

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<v Speaker 1>bit different, Like they have some videos and ads that

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<v Speaker 1>they can put in in between publicly posted content. You

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<v Speaker 1>also can as a brand kind of build a bespoke

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<v Speaker 1>lens like a filter to put in the app. All

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<v Speaker 1>that's to say it requires a lot of work. Um,

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<v Speaker 1>and these are kind of brand type narrative activations that

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<v Speaker 1>a lot of marketers might be killing right now. So, Um,

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<v Speaker 1>you know, back to your question, like is a delusion,

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<v Speaker 1>I don't know, Like they think of themselves as a

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<v Speaker 1>is a innovative product company, but it's clear that the

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<v Speaker 1>company now is saying that they need to focus on

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<v Speaker 1>where they really, you know, make their bread and butter

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<v Speaker 1>in terms of the business. Alex. Also, I mean, we've

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<v Speaker 1>got changes to Apple's operating system and that's making it

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<v Speaker 1>difficult for snaps app and indeed also at the same

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<v Speaker 1>time Meta and companies either to track user activity. Yeah. Absolutely,

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<v Speaker 1>So that change that happened in the iOS fourteen update

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<v Speaker 1>more about a year into that here, And what that

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<v Speaker 1>did is is, to your point, make it much more

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<v Speaker 1>difficult for social media platforms to basically track the effectiveness

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<v Speaker 1>of ads on the platform. Um. Snap Also, you know

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<v Speaker 1>their head of their chief business officers leaving for Netflix.

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<v Speaker 1>She's the one who oversaw ad sales. Her departments are

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<v Speaker 1>actually getting moved over to a new chief operating officer

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<v Speaker 1>who comes from the engineering department. It seems like them

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<v Speaker 1>kind of marrying engineering with the ad sales could be

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<v Speaker 1>a way to get them a little bit closer to

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<v Speaker 1>some workarounds that they're having to find because of the

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<v Speaker 1>changes to Apple's policies that made it much more difficult

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<v Speaker 1>for them to um, you know, gauge the metrics of

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<v Speaker 1>success for the ads that marketers are paying for. So

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<v Speaker 1>are they dialing back on ambition to create their own content,

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<v Speaker 1>whether it's some kind of show or series. Are are

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<v Speaker 1>they becoming less aggressive in that front? Yeah? Absolutely so.

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<v Speaker 1>Snap Originals is something that was on the chopping block.

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<v Speaker 1>This was something that's been around for a long time

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<v Speaker 1>since the part of the Snapchat app called the Discover

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<v Speaker 1>Explore page was around. These are the shows in series

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<v Speaker 1>that Snap produces. It looks like advertisers and brands are

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<v Speaker 1>able to still post those these kind of you know,

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<v Speaker 1>longish form for social media videos, but their own content.

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<v Speaker 1>That is one of the things that has fallen below

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<v Speaker 1>the line and probably where some of the workforce that's

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<v Speaker 1>being cut is coming from. Now, let's not forget also

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<v Speaker 1>Alex here that we've got so many entrance now, TikTok, Netflix,

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<v Speaker 1>Walt Disney all coming up with ad supported streaming, uh

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<v Speaker 1>streaming a video now that's just really taking out more

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<v Speaker 1>and more of the pie. It's it's the pies remain

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<v Speaker 1>the same. There's more people competing for their share, absolutely,

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<v Speaker 1>and Snap is getting a smaller slice. You know, you

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<v Speaker 1>mentioned TikTok I cover their US operations for us here

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<v Speaker 1>at Bloomberg. TikTok goes after kind of the same customer

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<v Speaker 1>that snapped US. Snap has historically really one this younger

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<v Speaker 1>teen and twenty something customer and and really kind of

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<v Speaker 1>UM at least owned the reputation for that market here

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<v Speaker 1>in the US. In particular, TikTok swept in with a

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<v Speaker 1>really kind of sticky, engaging app and frankly with a

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<v Speaker 1>lot of UM advertising tools and ad slots that are

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<v Speaker 1>more valuable to some of these advertisers. So, whether it's

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<v Speaker 1>the battle for young users or the battle for UM,

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<v Speaker 1>the folks who are paying for the attention of young users, UM,

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<v Speaker 1>they definitely have a big, big, a lot of competition,

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<v Speaker 1>particularly UM from TikTok with on that pie, which is

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<v Speaker 1>you know, as we said, shrinking in these kind of

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<v Speaker 1>uncertain economic times, Alex very quickly, does the board still

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<v Speaker 1>have confidence do you think? In CEO Evan Spiegel very

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<v Speaker 1>quickly twenty seconds or so. Evan and his founder have

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<v Speaker 1>ninety nine or so percent control, so if they have

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<v Speaker 1>confidence in him, it seems like it, but they have

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<v Speaker 1>a majority of the voting control of that company. All right,

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<v Speaker 1>I'll let you decide, all right, Thanks, good stuff. Alex

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<v Speaker 1>Barenka is Bloomberg social media reporter, joining us here on

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<v Speaker 1>Dave Breakcasia