Snap's strong man's wrist, why is it a good thing for it?

Author ｜ Chen Yan

Edit ｜ Song Han

The global layoffs have intensified.

At the beginning of September, the social software Snapchat parent company Snap reported the news that about 20% of employees were cut off, involving about 1,000 employees.

Since the beginning of this year, facing a more challenging macroeconomic environment, layoffs have been staged in the global market. Many Internet technology giants such as Meta, Amazon, Microsoft, Google, Tiktok have announced the layoffs or recruitment of slow news to reduce costs and reduce efficiency by shrinking business and reducing labor costs.

Snap is also determined to re -adjust key businesses, and layoffs have become a specific measure for business reorganization.

SNAP CEO Evan Spiegel said in a memorandum of employees in early September that SNAP's business reorganization plan will focus on the three major strategic priorities in the future, that is, community growth, revenue growth, augmented reality reality (AR). Other non -direct projects are "suspended or significantly reduced."

Stipigel has recently announced the goals of the three directions of next year in the 11th anniversary of the establishment of Snap, including Snapchat daily live users increased to 450 million, revenue increased to $ 6 billion, and AR monthly living The number of users has increased to 1 billion.

So can SNAP quickly get out of the predicament after the layoffs and reorganization and achieve new business goals?

In the cold winter of the industry, SNAP toughness is higher than peers

Affected by incidents such as inflation, rising interest rates, and incidents of Russia and Ukraine conflicts, the global economic uncertainty further intensified. In this context, major Internet technology companies, including Snap, are facing revenue challenges.

In July of this year, the second quarter financial report released by SNAP showed that its revenue increased by 13%year -on -year, but it did not reach expectations. The net loss expanded by 178%compared to the same period last year.

So the news of the layoffs is not surprising. As early as May of this year, Spiegel had conveyed information to employees in a memorandum of "slowing down recruitment". Until September, the news of the layoffs finally "boots landed."

In fact, under the influence of many uncertain factors and revenue pressure, similar layoffs have occurred on many Internet technology giants this year.

In June of this year, Mark Zuckerberg, CEO of Meta, announced that the company will reduce at least 30% of engineer recruitment plans and remind employees to prepare for serious economic recession.

Amazon's operating income in the second quarter of this year was "cut" year -on -year, from $ 7.7 billion to $ 3.3 billion. The number of employees decreased by 6%compared to the first quarter, about 99,000, and was called "the largest layoff in a single quarter so far."

Google and its parent company Alphabet CEO Sandal Pipchai recently said that it hopes that the company's efficiency can be increased by 20%, which is interpreted as the meaning of "layoffs". In August, the executives of Google have stated that they will "comprehensively review" employees' sales performance and overall productivity. If the performance in the third quarter does not meet the expectations, it will start layoffs.

Picture source: varietyy

According to Variety's data, since Q2, 2019, the year -on -year growth rate of SNAP advertising revenue is higher than that of Meta, Twitter and YouTube each quarter.

Despite the huge challenge of the environment, Snap's financial report data still shows positive signals: its revenue and user growth in the last quarter (Q2 2022) are higher than that of Meta and Twitter. In fact, SNAP's advertising revenue has been the first of these companies from the second quarter of 2019.

In terms of revenue in the second quarter of this year, SNAP increased by 13%year -on -year, while Meta and Twitter increased by -1%year -on -year, Pinterest increased by 9%year -on -year, and YouTube's advertising revenue increased by 5%year -on -year.

In terms of users, Snapchat's number of daily live users in the second quarter was 347 million, an increase of 18%year -on -year, exceeding analyst expectations. In comparison, Meta's daily activity only increased by 3%year -on -year, Twitter's monetable daily activity (MDAU) increased 16.6%, Pinterest monthly living or even fell 5%.

It can be seen from the data comparison that even if the industry suffers from the cold winter, the foundation of SNAP's business is still stable and continued to grow, showing the toughness of higher peers.

"Go to fat and gain weight", focus on three directions

Although Snap has undergone the layoffs, its team size is still exceeded the same period last year. Spegel said that the reorganization is to "better cope with the challenges brought by the macroeconomic situation, and to balance between investment and innovation to ensure that the company can develop in the long run."

Specifically, this reorganization will stop investing in business investment in the original self -made drama project Snap Originals, mini -program minis, mini -program games, and flight camera Pixy. Essence ROHIT Kulkarni, an Internet and capital market analyst of stock trading, research and sales company MKM PARTNER, said in an interview with CNBC that for SNAP, which has been rapidly invested and expanded quickly, the current measures can save expenses for the company in the coming year, which is the right. action.

SNAP estimates that compared with the second quarter of 2022, the reorganization of this layoff will save the company's annual cost of $ 500 million.

While shutting down the edge business, Snap also adjusted a series of organizational structures. Jerry Hunter, the senior vice president of SNAP responsible for the engineer team, was promoted to Snap's first chief operating officer (COO), which was promoted to Snap. Relationship, as well as engineer team.

In the past, SNAP's advertising business team and technical team belonged to different departments. After this adjustment, these two teams were uniformly classified as new COO management. It is believed that such a technical team will provide better technical support for the advertising business team. Help advertisers better put and measure the effect on Snapchat.

As part of the strategic adjustment, SNAP announced the company's three core development directions after the company's reorganization, that is, maintaining user growth momentum, continuous investment in advertising business platforms, and establishing and consolidating leading positions in the AR field. In other words, SNAP's future key businesses are concentrated in community growth, income growth and AR.

Picture source: SNAP investor relationship website

SNAP's three major directions in the future: user growth, revenue growth and AR.

In an uncertain macroeconomic environment, cutting off the edge business of "burning money" will enable SNAP to continue to invest in future key businesses. Through the stability of community growth and enhance the basic disk, the SNAP plans to further increase revenue, increase profitability, and ensure investment in AR's long -term direction.

In the internal letter of the 11th anniversary of Snap, Spegel also revealed the specific goals of Snap in these three core directions:

In terms of user community, it is planned to increase Snapchat's daily living users by 30%by the end of 2023 to 450 million;

In terms of revenue, it is planned to increase the revenue to US $ 6 billion in 2023, of which 5.65 billion US dollars come from advertising revenue. The proportion of AR advertising in this part of advertising revenue will increase to 10%. US $ 350 million in revenue from advertising revenue is expected to be newly launched from Snapchat "Snapchat +". According to "White Whale Going to the Sea", "Snapchat +" has grown strongly since its launch. It has a monthly income of over 5 million US dollars, which has exceeded Twitter Blue's cumulative income. At present, "Snapchat +" subscribers have exceeded 1 million, and 10 million subscriptions will be achieved by the end of next year.

In terms of AR, the SNAP plans to increase the AR monthly active households to 1 billion, on the other hand, it will further increase the commercial value of AR and set up an AR enterprise business department to further expand the B -end revenue of AR.

After the revenue target scheme was exposed by the media, SNAP's stock price soared by 8%.

Multiple products have not yet commercialized, and the revenue potential is huge

Although Snapchat has a monthly living user of up to 600 million in the world, compared with other social platforms, each user's revenue (ARPU) is much lower than similar products.

Picture source: SNAP investor relationship website

Taking the North American market as an example, Facebook has 197 million daily live users, ARPU is $ 283, and its daily live is twice that of Snapchat, but ARPU is 8.6 times the latter.

Twitter's daily live users in North America are 42 million, less than half of Snapchat, but ARPU is more than twice that of Snapchat.

It can be seen that in North America, Snapchat is two times that of its own Facebook, or Twitter, which is only its own, and ARPU is much lower than the other party, and there is a lot of room for growth.

However, Snapchat is the youngest among these three companies. At present, the ARPU level in the development stage is actually equivalent to Facebook at the same time. If the same development trend, Snapchat's ARPU will grow to about four or five times in the next 7 years.

Picture source: SNAP investor relationship website

The vast majority of Snapchat currently comes from video ads, and video advertisements are concentrated on the Stories page. The proportion of AR advertisements is single, mainly in the camera entrance. There are also many core products on the platform that have not been commercialized, and in the future, they also have huge revenue potential. Here we have to introduce Snapchat's product function.

Different from the Weibo -style information flow product such as Twitter, or a short video platform such as TIKTOK, the core of Snapchat is the social platform of acquaintances, and it is through visual communication methods through pictures, videos, AR and other visuals, not simply text. So when you open the Snapchat, the first pop -up camera viewfinder is convenient for users to shoot and send them to their friends immediately.

As the originator of the incineration after reading, the content sent by Snapchat users to friends will also disappear after a certain period of time, simulating the scene of chatting between people in real life, and disappearing in the air after the conversation, leaving only memories.

On the concept of "acquaintance+visual communication", the five core functions are gradually developed in Snapchat: maps, chat (Camera), stories, and spotlight.

Snapchat five core platforms. Picture source: SNAP

The camera is the core function of Snapchat. Users can take pictures and videos when they turn on the camera. Here are also AR functions that Snapchat is leading in the industry. Users can experience various AR filters and do AR shopping here. According to data released by Snapchat, 250 million users use AR every day, the number of filters exceeds 2.5 million, and the average daily interaction between users and AR exceeds 6 billion times.

Camera is a commercialized product that Snapchat has been commercialized, including Dior, Nike, Cartier, Wal -Mart, Xiaomi, Mihayou, etc. Many domestic and foreign brands are using Snap AR for marketing.

Picture source: SNAP

Cartier launch AR trial wearing to promote its jewelry products in Snapchat.

Spegel said in the internal letter that as a long -term strategy, SNAP will continue to invest, and is developing the next generation of Spectacles glasses.

At present, SNAP's AR ecosystem covers Lens Studio on the creation end, and the distribution end Camera Kit (third -party access), Spectacles glasses and Snapchat apps, and the back end has Lens Could launched in the first half of this year. There are more than 250,000 AR creators in the entire ecology.

In the map, Snapchat users can view each other's location and view the surrounding places, including restaurants, shops and performances with the consent of their friends. Snapchat has recently released data that the map function has been available for 300 million months of living users in the past five years and continued to grow.

However, the map of Snapchat is not commercialized. Imagine that the restaurants and performances in the map in the future have more than 30 million existing geographical places information for commercial cooperation and monetization. The map will become another product full of imagination in Snapchat.

In fact, the search for social and living information based on geographical location is becoming a vent. The domestic public comment has launched the map function in its APP. In July this year Zuckerberg announced the launch of the map function in Instagram. Apple has also continuously enhanced the social attributes of the "search" app in the iPhone.

The next thing to focus on Stories, it can be said to be another innovation that affects the entire industry after reading after reading, and now it has become the standard for many social products including Instagram.

The pictures and videos taken by the user will also disappear after a certain period of time after publishing in Stories, and there will be no public likes and comments. Only friends can make comments privately. In this way, when the user releases Stories, you don't have to care about how much praise can be accumulated. Without such a likes pressure, users can send stories to record daily moments anytime, anywhere, but the release frequency has increased greatly, and the viscosity is very high.

Users can also see some of their own channel content and professional production content (PGC) in the Discovery area of ​​the Stories interface.

Picture source: SNAP

Stories function in Snapchat.

Spotlight is a short video function launched by Snapchat in 2020. Snap announced in the second quarter of this year that users watching video content in Spotlight increased by 59%year -on -year. In the first year of SPOTLIGHT, the average short video released by each creator has tripled a month. This also confirms the hot development trend of the entire short video industry. It is worth noting that SPOTLIGHT is another product that has not yet been realized in Snapchat. From the perspective of the strong gold absorption ability of the short video platform, Spotlight can be said to be a gold mine to be excavated.

In summary, the core functions of maps and short videos in Snapchat have not yet been commercialized advertising, and AR will also make efforts to increase related advertising revenue in the future. In addition to advertising revenue, the "Snapchat+" subscription service mentioned earlier is also an attempt for Snap diversified income channels, and it has seen the positive feedback of the market.

Conclusion

Throughout the development of SNAP, it has also been trapped several times before, including the 2018 APP revision crisis and the sharp competition brought by the Stories function after being imitated by Instagram. It can be able to turn danger.

This layoffs and reorganization are not the first setbacks in their entrepreneurial history, and I believe it will not be the last time. After the reorganization, SNAP must have the determination of the strong man's wrist, the strict execution of the new development direction, and the continuous innovation in order to enlarge the key advantages in an uncertain environment and bring themselves into a more active growth track.

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