Lenny's Podcast: Product | Career | Growth
00:20:50 · Lenny Rachitsky
[00:20:50] S0: I do want to ask about Snap. I feel like it's a company that doesn't feel like it lived up to the potential of what I think Evan and everyone imagined it could be. I imagine the main reason from, and I had Evan on the podcast, is just the users that it's going after are just hard to monetize. Is that the core of what has kept Snap from becoming a bigger success, or is there more to it?
00:21:14 · Peter Sellis
[00:21:14] S1: I'll try and be as objective as possible, Lenny, because this is a little bit of my life's work and maybe I do have some level of chip on my shoulder, or... Yeah, I'll try and be as objective as possible. So I'll say two things, maybe three things about Snap from a monetization perspective, at least an ads monetization perspective. And then we could talk about they've had a lot of success with Snapchat plus and subscription products in general are doing well, but ads are truly the magical product market fit of consumer monetization on the internet, and there's a lot of mathematical reasons why that's true. And there are three things that hold back Snap from an ads perspective that I think the company, like we still talk about, is we deserve a little bit more credit maybe than we get, but I understand why we don't. The first is yes, the user base is extremely young. Snap appealed to Gen Z at an excessive rate early on, now even I think Gen Alpha as they graduate from Roblox and stuff like that. And there is a step change, literally a suspicious discontinuity in advertising CPNs between 17 and 18 and between 18 and 21 in the United States and abroad. If you're under 17, the rules around how you can track and measure and target ads are extremely constraining and justifiably so, right? To protect teenagers. That means that it's essentially much harder to drive ROI from this group of people versus an 18-year-old versus a 21-year-old and 24-year-old. And you can say all you want about, "Oh, the teenagers influence their parents, blah, blah, blah." The key thing to think about is, those are just harder to measure and it's harder to build performance products around things that are hard to measure. And so yeah, Snap's audience is definitively less valuable from that perspective, versus like a Pinterest or an Instagram or a Twitter. The second thing is, almost every ads business, every ad product you'll see that isn't search based, every display ad product opens to the screen where you put the ads. There's a lot of studies around attention and just mathematically where you're going to get the impressions, where you need to maximize that for advertising. And Snap opens the camera and that makes it awesome as a product, in terms of its ability to be the fastest way to capture a moment and share it with your friends.
00:23:33 · Peter Sellis
But in no part of that flow, the core flow of taking a Snap and sending it to your friends, is there a logical place for an advertisement. It is just not a feed-based product and it is not a consumption oriented product. It is a creation oriented product, a visual creation oriented product, and there don't really exist a lot of advertising kind of formats that go after this. We experimented with this a lot at Snap, and probably one of my biggest failures was the ability to drive camera monetization. It was literally just too hard. I couldn't figure it out or I couldn't green light the teams that could figure it out. And yeah, so it's a very hostile environment for advertising from that initial thing. And then at its core, it's a messaging app, and there aren't really great ad products for messaging apps right now. I think even the monetization of certain messaging apps via subscription or via business accounts, and people will always cite some of the Asian chat apps as examples, you peel it back and from a dollars per time spent perspective, none of these are doing that well. None of these are exceptionally great at monetizing. Message apps are incredible, utilities are incredible to have as part of a portfolio, but Snap was trying to build a multi-billion dollar ads business very quickly on a lower value audience, a very tough format for ads, and a service that was more utilitarian than consumption oriented. ... service that was more utilitarian than consumption-oriented.
00:25:03 · Lenny Rachitsky
[00:25:03] S0: Wow, that was fascinating. I think it's important to note, Snap is doing, it's a many multi-billion dollar business, I think a billion monthly active users, all the teams use it. In the scheme of things, it's very successful. It's more just everyone thought it was going to be much, much bigger like the next Facebook.
00:25:25 · Peter Sellis
[00:25:25] S1: Yeah. If you were to peel apart Snap as a product, again, some of my information is dated, and I haven't really looked at, but it's the number one messaging app among teenagers in almost every Western country, 70 to 100% penetration of people under 21. It's their default map, gets used more than Apple or Google Maps by this group. I think it's the most popular astrology app for most of these... It's definitely the most common camera. So, imagine if you're like, hey, there's a holding company, there's a Gen Z Berkshire Hathaway that has the number one camera app, the number one messaging app, the number one maps app, the number one astrology app, the number one content... I guess TikTok would be the number one content consumption one, which is part of the problem with the ad stuff. But you peel it apart, and you're like, that's an insane consumer product track record. And none of this credit goes to me at all, this is that OG design team that cranked out some of the biggest hits of our generation. But I think from an ads product, maybe the chip on my shoulder is, Snap started after Twitter, after Reddit, after Pinterest, it went public before all of them except for Twitter. It was quicker to four billion, I think, in ads revenue than all of them, despite starting later. Twitter is a global town hall, all the most valuable people on the planet are talking on Twitter. Pinterest is literally a place where you tell it what you want to buy. These are really great places for ads. What was Snap known for at the time? I don't know, I don't want to make your podcast brand unsafe, but we can talk about what Snapchat was known for at time.
00:27:09 · Lenny Rachitsky, Peter Sellis
[00:27:09] S0: Disappearing photos of a certain kind. [00:27:11] S1: Yeah. It was still able to scale this ads business, which I think is, it's pretty fascinating. But yeah, it's a fascinating company, and I think just given the dearth of 100 million Dow consumer products that have been started in the United States since then, it still deserves to be studied. [00:27:28] S0: Yeah. When Evan was on the podcast, I pointed out that I think it was the last big successful social consumer product to launch, which was 12 years ago. I think other than TikTok, which is not social really, it's more of a content media sort of thing. [00:27:44] S1: Yeah. Discord technically started in 2015, but very, very, very- [00:27:51] S0: Very different. [00:27:53] S1: ... a niche product. The world's biggest niche is gaming, but yeah, quite a different vibe. [00:27:58] S0: Just maybe a final though here, I'm curious to get your take. You could almost argue that this is an example of more PMs would have been helpful, because it's such an incredibly beautifully designed product and experience, and so delightful, and people love it and are hooked on it, but it's just the monetization and the business basically was not solved. And you would think that's where PMs would come in. And so, I wonder if that was a hindrance, is the low number of PMs involved? [00:28:29] S1: I think that Snapchat+, the subscription product, if it had launched... Subscription products are tough because the math around them is pretty brutal. Essentially, time is your enemy with subscription products. [00:28:45] S0: Churn.