Evan Spiegel, CEO of Snap Inc., is working to boost employee morale after the company’s stock plummeted by 48% this year. In an internal letter, he informed employees that Snap is on track for record-breaking annual revenue and remains committed to advancing its augmented reality initiatives.
Spiegel addressed the disparity between the company’s business progress over the past year and its lagging share price, explaining that the slower growth of Snap’s advertising business compared to its competitors is the primary reason for the performance gap.
Snap, which is best known for its Snapchat app that features disappearing photos, faces stiff competition from Meta Platforms Inc.’s Instagram and ByteDance Ltd.’s TikTok—both of which appeal to younger audiences and have larger advertising operations. Notably, Meta’s shares have surged by 45% this year.
Snap has been revamping its advertising strategy to focus more on direct response ads that encourage users to take immediate actions, such as downloading apps or making purchases. Previously, the company emphasized brand awareness campaigns, which are cheaper but also less profitable. This shift led to a decline in Snap’s sales for several quarters in 2023, but growth resumed late in the year, with direct response revenue increasing by 16% in the second quarter, Spiegel highlighted in his message to employees.
He also mentioned that the company is testing two new ad formats, which will introduce advertisements into the chat inbox and Snap’s map feature, marking the first time the popular map tool, which shows users the real-time locations of friends, will generate revenue.
Spiegel also emphasized that Snap will continue its significant investments in augmented reality technologies and smart glasses. The company began providing forecasts for infrastructure expenses earlier this year, which include costs related to supporting machine learning, augmented reality, and artificial intelligence.
He noted that, unlike digital advertising, where Snap was a late entrant against well-established competitors, the company is leading in the market for innovative smart glasses and the development of its augmented reality platform.
Snap first introduced its smart glasses, Spectacles, in 2016. The glasses, known for their colorful design and unique distribution through pop-up vending machines, gained initial popularity but sold only about 220,000 units, resulting in a $40 million write-off. Snap is anticipated to unveil a new model of AR smart glasses at its upcoming annual partner summit, while rival Meta also has plans to launch new glasses.
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