How to Turn Down a Billion Dollars

by Billy Gallagher

  Snapchat will keep experimenting, pivoting, and evolving as it figures out an ideal content strategy. But Snapchat is not the only tech company trying to convince media outlets that it is the future of publishing. Snapchat has competition from Facebook on every front.

  CHAPTER THIRTY-ONE

  FEAR AND LOATHING IN MENLO PARK

  MARCH 2016

  MENLO PARK, CA

  Just before Facebook went public in 2012, Mark Zuckerberg had a bound red book titled Facebook Was Not Originally Created to Be a Company placed on every employee’s desk. The book’s penultimate page offered a grave rallying cry:

  If we don’t create the thing that kills Facebook, someone else will.

  “Embracing change” isn’t enough. It has to be so hardwired into who we are that even talking about it seems redundant. The Internet is not a friendly place. Things that don’t stay relevant don’t even get the luxury of leaving ruins. They disappear.

  Like any good religion, the cult-like startup world has a holy scripture: The Innovator’s Dilemma, a 1997 book by Harvard Business School professor Clayton Christensen. Christensen wrote the book before “disruptive innovation” was a punchline on the HBO comedy Silicon Valley, and it has managed to maintain its revered status for two decades.

  We can see the core concept of The Innovator’s Dilemma at work in Snapchat’s story: a new entrant makes a product that is so far beneath what an incumbent does that it seems silly—why would we waste our time down there? Who cares about a sexting app? But the entrant fills a need, as teenagers prefer using an impermanent messaging app. Then the entrant gets better (adding more features like video sharing and geofilters) and moves upmarket (adding Snapchat Stories and moving into the social network space), attracting a bigger share of the market (passing Twitter in daily active users) and better customers (older, more affluent users, and celebrities and media companies signing on as publishers).

  Mark Zuckerberg is hyper aware of this potentially lethal threat from startups; he builds separate teams at Facebook to create new apps and snatches up the best new companies by making aggressive offers for hot startups like Instagram, WhatsApp, and Oculus Rift. But Evan wouldn’t sell, so Snapchat became the one that got away. And Snapchat keeps moving up and up, attracting more users and stealing more photos and videos that users formerly posted to Facebook or Instagram.

  It’s tempting to think that whoever has the better team and better technology will win. But that’s simply not true in social media. In fact, the pure technology probably matters least. What matters most is culture and customs—what you value and how that plays out in your actions. If you compare Facebook and Snapchat right now, you can do the same things on Facebook and Instagram that you do on Snapchat: post photos, message friends, send money, read articles, watch celebrities’ videos, etc. But you don’t do the same things because the different apps were built in different orders for different audiences. They have different aesthetics and different customs.

  Snapchat’s ethos was so directly antithetical to that of Facebook that anyone who chose to work at the latter would struggle to understand the former. It wasn’t merely arrogance that promoted this misunderstanding, though that was the case in the beginning. Rather, if you believed in the mission of connecting the world through a permanent online social network, believed so strongly that you chose to spend your time working on that network, how could you ever fully appreciate the long-term potential of an app where everything disappeared every twenty-four hours? It became an ideological holy war. You were part of the Facebook-Instagram religion, based on permanence and data, or you were part of the Snapchat religion, focused on ephemerality and a small group of people’s decisions without data. You couldn’t believe in both.

  In the summer of 2016, Mark Zuckerberg told Facebook employees at an all-hands meeting they shouldn’t let their pride get in the way of doing what’s best for users, even if that meant copying rival companies. Zuckerberg’s message became an informal slogan at Facebook: “Don’t be too proud to copy.” And it certainly wasn’t.

  Snapchat had proven there was an enormous market for its ephemeral approach. Thus, undaunted by his failed attempts to buy and copy Snapchat, Zuckerberg set out to attack Facebook’s biggest threat on multiple fronts.

  In early 2016, Facebook made a big push to get media companies and celebrities to use its live video broadcasting tool, Facebook Live. Facebook had seen from its Onavo data how people were watching live video on a startup named Meerkat and Twitter’s Periscope app; the company could also see how many snaps per day Snapchat users were sending, many of which were videos. Facebook had to drastically increase its video offerings. Facebook Live let Facebook users watch live video or video replays after the broadcast had ended. Broadcasts ranged from celebrity interviews to reporters covering events to regular people talking to their friends.

  With Facebook’s unparalleled scale, even—or perhaps especially—the inane could go viral. In April 2016, BuzzFeed produced a Facebook Live video of two employees adding rubber bands to a watermelon until the watermelon exploded. The video lasted forty-five minutes, with 807,000 people tuning in simultaneously at its peak; millions more replayed the video on Facebook. A month later, Candace Payne bought herself a Star Wars Chewbacca mask that roared when she opened her mouth. Payne filmed herself on Facebook Live trying it on and laughing hysterically. Her video has been viewed almost 160 million times.

  Live video was great for celebrities and interesting events, but, as we saw with Justin Kan’s Justin.tv experiment, most people rarely have interesting enough lives to broadcast live video. Neither Facebook nor Snapchat had fully figured out their content strategy yet. Both tried to win over media companies and experimented with producing original content.

  Facebook COO Sheryl Sandberg personally visited talent agencies in Los Angeles to pitch them on Facebook Live. Facebook signed deals with 140 media companies and celebrities, paying them more than $50 million total to post Facebook Live videos for a year. Like those who signed with Discover, the list of media companies ran from well-established outfits like CNN and The New York Times to smaller upstarts, and the two companies shared many of the same publishers. Tastemade will earn around $1 million from Facebook to produce over one hundred Facebook Live shows every month for a year. While Facebook had never paid content creators before, it now handed out seventeen contracts worth over $1 million; the highest bounty went to BuzzFeed for a little over $3 million for a year. Even celebrities like Kevin Hart, Gordon Ramsay, and Russell Wilson took checks from Facebook.

  As Snapchat grew ever more popular with media companies and celebrities, many took to making their profile pictures on Facebook and Twitter a Snapcode—a Snapchat-generated QR code that allows one user to add a second user on Snapchat if the first user takes a snap of the second’s QR code. Facebook and Twitter didn’t like these influencers using their sites to grow their Snapchat followings. Facebook suggested to one media company that if they didn’t stop using a Snapcode as their profile picture, it could affect their posts’ rankings in the all-important Facebook News Feed. Facebook then updated its policies, informing media companies and celebrities that they could only share sponsored content if their profile pictures and cover photos didn’t feature third-party brands or sponsors. Twitter asked the Huffington Post to change their profile picture from a Snapcode to something else. Instagram warned users not to use “links asking you to add someone on another service.”

  This behavior attempted to slow Snapchat’s growth and served to continue the pissing contest Snapchat and Facebook had been having for years; early on after Snapchat released geofilters, they had placed a geofilter over Facebook’s campus featuring the Snapchat ghost pointing and laughing. As for Twitter, Snapchat didn’t even bother fighting back, as Snapchat passed Twitter in daily active users (150 million to 140 million) in June 2016.

  In August 2016, Instagram released Instagram Stories, a new feature essentially copying Snapchat Stories that let
users post photo and video slideshows that disappeared after twenty-four hours. Like Snapchat Stories—and unlike normal Instagram—Stories had no likes, no comments, and no sharing tools, so there was no anxiety about posting. Instagram put users’ stories in little bubbles at the top of its feed, both to drive adoption of the new feature and to leave Instagram’s normal feed alone. With this setup, users didn’t have to feel anxiety about clogging the feed and could post as many impermanent photos and videos as they wanted.

  A few days after Instagram launched Stories, Facebook began testing face filters that were extremely similar to Snapchat’s lenses. In Brazil and Canada, users who opened their Facebook app would see an open camera window—similar, again, to Snapchat opening directly to the camera—that let them apply Brazilian- or Canadian-themed face paint to cheer on their country in the Olympics. They could also add geofilter lookalikes on top of their photos that said “Team Canada” and “Team Brazil.” Facebook copied Snapchat throughout 2016, testing the Stories features wherever it could—in its Facebook, Messenger, WhatsApp, and Instagram apps—and adding impermanent messaging options to Instagram and Messenger.

  Snapchat had always strived to have the best camera to lock up the best, most creative content and the coolest users—the hip, young crowd and creative influencers. Facebook and Instagram had learned that they couldn’t simply copy Snapchat’s app to beat it. But by adopting all of Snapchat’s features in different parts of their empire, the combined giant could certainly slow Snapchat’s growth. Hundreds of millions of people use Facebook and Instagram but don’t use Snapchat. If they started enjoying silly Facebook lenses or recognized the appeal of impermanent Instagram Stories, they might never bother downloading Snapchat.

  Instagram founder Kevin Systrom was very open about copying Snapchat in an interview with TechCrunch’s Josh Constine:

  Instagram deserves all the credit for bringing filters to the forefront. This isn’t about who invented something. This is about a format, and how you take it to a network and put your own spin on it.

  Facebook invented feed, LinkedIn took on feed, Twitter took on feed, Instagram took on feed, and they all feel very different now and they serve very different purposes. But no one looks down at someone for adopting something that is so obviously great for presenting a certain type of information.

  Innovation happens in the Valley, and people invent formats, and that’s great. And then what you see is those formats proliferate. So @ usernames were invented on Twitter. Hashtags were invented on Twitter. Instagram has those. Filtered photos were not invented on Instagram.

  And I think what you see is that every company looks around and adopts the best of the best formats or state-of-the-art technology. Snapchat adopted face filters that existed elsewhere first, right? And slideshows existed in other places too. Flipagram was doing it for a while. So I think that’s the interesting part of the Valley. You can’t just recreate another product. But you can say “what’s really awesome about a format? And does it apply to our network?”

  Don’t you think that Snapchat’s done a really awesome job? And Facebook’s done a great job. And Instagram’s done a great job. I think all of these companies have done a great job. Some people invent stuff. We’ve invented things.

  Gmail was not the first email client. Google Maps was certainly not the first map. The iPhone was definitely not the first phone. The question is what do you do with that format? What do you do with that idea? Do you build on it? Do you add new things? Are you trying to bring it in a new direction?

  I don’t believe these [Instagram and Snapchat] are substitutes, and that’s okay.

  Facebook had finally realized after failing with Poke and Slingshot that just slapping ephemerality onto its services was not working. But Instagram made more sense. Instagram was still cool among younger users.

  Instagram Stories became a massive success. Just two months after its launch, it had 100 million daily active users, a number that doubled to 200 million by April 2017 and 250 million by June 2017, figures that dwarfed Snapchat’s 166 million daily active users.

  Throughout the end of 2016 and early 2017, I remember friends commenting on how many more views they got on their Instagram Stories than on their Snapchat Stories. Instagram had over 700 million daily active users (on the whole app, not just Stories), compared to just 166 million for Snapchat, and most users had more friends and followers on Instagram than they did on Snapchat. The thrill of seeing how many people were watching your story that Snapchat had tapped into was now getting taken over by Instagram’s larger user base.

  Snapchat was never meant to be a place where you had thousands of followers and strove for the most possible views of your story. After all, is chasing story views that different from chasing likes and retweets? But the way Evan envisioned Snapchat wasn’t conducive to growth. Instagram is far more tailored for it, as the app suggests friends to follow and makes it much easier to find and follow accounts you might like.

  Instagram Stories hurt Snapchat’s engagement and growth at a critical time for Snapchat, as it prepared for its initial public offering. But Instagram may also be merely recreating the early 2010s Facebook that led to Snapchat’s popularity in the first place. High story views and follower counts are a sugar rush now, but they lead to bloated feeds and a deep lack of intimacy.

  ESPN reporter Kate Fagan wrote about this lack of intimacy in her 2017 book, What Made Maddy Run: The Secret Struggles and Tragic Death of an All-American Teen, which covered the life of nineteen-year-old Maddy Holleran. In her book, Fagan discusses how the way we communicate with each other is highly filtered:

  Perhaps the most important distinguishing feature of a social account is its public nature, the understanding each user has, from the moment of launch, is that everything is for public consumption. But perhaps we are overstating the effect of this distinction. If in private, most of us allow ourselves to say or write certain truths we otherwise wouldn’t, then perhaps the reverse holds true. Perhaps we share things in public that we couldn’t offer in private. If we’ve accepted that we are different in private, is this not also true for how we reveal ourselves in public? And which version of ourselves is more real?

  As young people, we are trying to find our voice. Trying out who we are, again and again, until something feels more accurate than the previous thing … We believe what we see. And we can’t be what we can’t see. We are so credulous when we assume that everyone else must be the version of themselves they portray in public, even if we are hardly the people we present ourselves as.

  We put time into our social media because we believe it affords us the unique opportunity to fashion our own identity. We care about the images we post and the lines we write underneath those images, because it’s all part of reflecting who we are and constructing who we want to become. Would you put more time, or less, into a post if you knew it was your last? Would you want the image and words to be perfect, an ideal, lasting representation of you? Or would you quickly recognize the futility of the pursuit, that the whole thing was a mirage merely reflecting distorted images of the real world? And would you instead, spend your time absorbing the world itself?

  Ultimately, absorbing the world itself is what Snapchat wants to empower its users to do. But this is often at odds with users’ short term desires, and Snapchat’s goals for growth and profit. The more intimate an area is, the harder it is to place advertiesements there. So while Snapchat messaging may be more raw and unfiltered than glamorous Instagram shots, Snapchat Stories posts are growing more and more staged and similar to other social media feeds.

  Some young people in Snapchat’s core demographic have addressed this by creating second Instagram accounts to share more authentic, personal photos and videos with their closest friends. Dubbed “Finstagrams,” short for Fake Instagrams, they restrict their following to a few dozen of their closest friends, or perhaps even less, and abandon the typical social norms of Instagram; they post multiple pictures per day
, mundane photos, screenshots of text conversations, and silly selfies.

  Nonetheless, it’s telling that these users decided to create second Instagram accounts to foster this sense of intimacy versus using Snapchat more. And while Evan may not want to make Snapchat a social network focused on the number of views your posts get, those high numbers attract more advertising dollars.

  Facebook tried to copy Snapchat a million times. But the failures didn’t matter—only the success would.

  CHAPTER THIRTY-TWO

  SNAP INC.

  VENICE, CA

  When Snapchat released its S-1, an SEC filing that companies looking to go public must make, in early 2017, it shed light on Snapchat’s strategy of placing many bets and failing fast:

  Our strategy is to invest in product innovation and take risks to improve our camera platform. We do this in an effort to drive user engagement, which we can then monetize through advertising. We use the revenue we generate to fund future product innovation to grow our business.

  In a world where anyone can distribute products instantly and provide them for free, the best way to compete is by innovating to create the most engaging products. That’s because it’s difficult to use distribution or cost as a competitive advantage—new software is available to users immediately, and for free. We believe this means that our industry favors companies that innovate, because people will use their products.