Snapchat always proved critics wrong. Then Evan Spiegel pushed for a redesign
Under pressure from Instagram, he changed how Snapchat looks. Then came the backlash.
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Most CEOs would probably prefer not to overhaul their core businesses less than a year after an initial public offering. It's a pivotal period when executives look to play up their company's stability and growth to a world of potential new investors on Wall Street.
But Evan Spiegel isn't most CEOs. The 28-year-old founder defied social media conventions time and again only to watch as rivals like Facebook raced to catch up. He was widely reported to have rejected staggering acquisition offers — including a reported $3 billion all-cash deal from Facebook — only to become one of the youngest billionaires in the world. Never one to conform to Silicon Valley, he placed Snapchat's headquarters hundreds of miles away, by the picturesque boardwalk of Venice Beach, for most of the company's history.
So perhaps it shouldn't have come as such a surprise when he joined a conference call with analysts in late 2017, nine months after Snapchat's parent company began trading on the New York Stock Exchange, and announced plans to change everything again. Snapchat, he informed the group, was about to undergo a massive redesign.
The plan: separate content from friends and publishers — and celebrity users — while attracting new users by making the app easier to use. Spiegel said at the time that the move could be "disruptive" to Snap's business. That proved to be an understatement.
A Change.org petition calling to remove the new update amassed more than 1.2 million signatures. Celebrity users Kylie Jenner and Chrissy Teigen publicly complained about the changes. Daily active user numbers declined for the first time ever. The stock fell lower and lower and lower.
So far this year, Snap's stock has recovered and the company says it's "cautiously optimistic" the days of losing users are over. After Snap reported it didn't lose any users in its most recent quarter, Wall Street cheered the news and the stock jumped 20%. It also saw gains in its daily active iOS users, which increased both quarter-over-quarter and year-over-year.
"There were some things that we expected, and some things we didn't," Spiegel told CNN Business, discussing the fallout from the redesign. In the "didn't" column, he says, were user frustrations over changes made to how friend lists were sorted. (Snapchat later made a few tweaks in response to user criticism).
As Spiegel put it in a September memo to employees, obtained by Cheddar, "We rushed our redesign, solving one problem but creating many others." He was also forced to confront the added challenge of pushing for risky bets while running a public company, as opposed to a private company, which has a smaller number of stakeholders.
"As a public company, there is so much more scrutiny and pressure to avoid taking risks because the public market rewards predictability," Spiegel told CNN Business.
He's since learned to communicate more about big product changes. But Spiegel has never been one to follow the predictable route.
Spiegel pushed for disappearing messages when the permanence of Facebook and Twitter posts was still the norm. He embraced vertical videos by default while most popular services preferred horizontal. Then, in 2017, he decided to buck internet norms again by redesigning the app to separate out the content you see from your friends and celebrities, in the hope of creating a more positive social media environment.
"Anytime you do a redesign of anything, you get a backlash because you've changed what people already know," said Bob Pittman, CEO of iHeartRadio, which is a partner to Snapchat. "If you're going to drive consumer products, you have to be willing to keep evolving it and moving it. I think Evan is probably one of the prime examples of someone who's willing to do that."
As Spiegel put it: "Innovation really is about taking risks. It's about doing things that are different."
To his critics, Spiegel may come off as a brash stereotype of what happens when young, risk-loving founders go unchecked. He and his co-founder, Bobby Murphy, have voting control over Snap, depriving shareholders of any say in how the business is run. And Spiegel received a bonus of more than $600 million in 2017 for taking the company public even though the stock fell.
But to his supporters, Spiegel is the definition of an assertive and audacious CEO who operates by his own internal compass. Over nearly a decade, he has built up a reputation as a product visionary not just for Snapchat, but for the numerous other companies that have copied him.
"No one was shooting vertical video before Evan, no one was making Stories [photos and videos that disappear after 24 hours], no one was visually communicating," said Rich Greenfield, a media and tech analyst at BTIG. "Evan has done an incredible job [innovating]."
Spiegel, for his part, recalls sitting around his father's dining room table alongside his co-founder coming up with the concept for a disappearing messaging app, only to be confronted with a wave of public criticism.
"We were working on this idea of ephemerality and the ability to communicate visually, and at the time, everyone told us it was ridiculous," Spiegel said. "People said it was for sexting or they said it was stupid."
Since then, Spiegel has worked to "reinforce a culture where people can take creative risks all day long and not feel like they're going to be judged for having a wacky idea." One part of that effort is "Council," an internal program where employees get together in small groups and share how they feel, and listen to others.
"That's what allows us to innovate over time," Spiegel added.
But under Spiegel's leadership, Snap has seen a wave of high-profile executive departures in the last year alone. The short list includes its chief strategy officer, human resources chief, VP of marketing and not one but two chief financial officers. This exodus only adds to the challenges Spiegel faces in turning around the company after the fallout from his controversial redesign, increased competition from Instagram and other issues.
In its most recent quarter, the company squeezed significantly more revenue out of its users despite flat audience growth. Snap's revenue for the holiday quarter reached a record $390 million, up 36% from the same period last year and well ahead of what investors expected.
Despite the initial backlash, Spiegel sees the redesign as a chance to reaffirm Snapchat's status as a platform without many of the issues other social media giants like Facebook and Twitter are grappling with, such as fake news and foreign election meddling. (Just last week, Facebook announced a new vision for the platform focused on privacy, ephemeral content and direct messaging, all of which Snapchat has long emphasized).
Rather than the typical news feed where users share outside links and content, Snapchat has a "Discover" section on the right side of the app. It features original Snap video series, posts from celebrities and influencers, as well as content from vetted publishers that partner with Snapchat.
"One of the really big benefits is that we get to decide the types of people that broadcast content on our service," Spiegel said. "We really identify this redesign as an opportunity to keep our commitment to our community by making sure that the content that they see on Discover is stuff that has been effectively selected by our team."
Greenfield says it remains too early to tell if Spiegel's big redesign was a success or a failure.
"This game is not over," he said. "It's all up to Evan to out-innovate his peers."
-- CNN Business' Seth Fiegerman contributed to this report.