Snap has been a publicly traded company for more than a year, and in that time, its social-mobile app Snapchat has had to contend with mimicry from rivals like Facebook, skepticism on Wall Street and a redesign that alienated some of its media partners.
Two things people get wrong about Snapchat, and two things Snap got wrong building its business
Upfront Ventures managing partner Mark Suster analyzes the mobile-social upstart on Recode Decode.
But critics shouldn’t overlook the things Snap has done right, Upfront Ventures managing partner Mark Suster said on the latest episode of Recode Decode, hosted by Kara Swisher. Suster, who is not a Snap investor but is a big booster of LA-based tech companies, said one of its unsung victories is a shift from brand advertising to cost-per-action ads, or ads that are meant to drive specific outcomes, like an app download.
“That’s more sustainable because it’s direct bidding,” Suster said. “And they’ve shifted all that revenue without falling off a cliff, which is a monumental achievement that people don’t talk about.”
He also said people underestimate the moats that Snap has built to keep its users opening the app every day, because they’re comparing it to the wrong Facebook-owned rival.
“I think Snapchat really is more like WhatsApp than Instagram,” Suster said. “It has a network effect, where once people are communicating with all their friends on it, it’s very hard to disrupt. So I think it’s a lot more sustainable than people think.”
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On the new podcast, Suster also acknowledged that even though Snap has succeeded in innovating on messages with features like Bitmoji and that augmented reality hot dog, it also has screwed up in some big ways. One of its stumbles was not having a way to retain some of its most famous users.
“I don’t think they understood the world of influencers well enough,” Suster said. “They chose not to lean into that, and a lot of those people ended up at Instagram. I think you could have sucked the oxygen out of the room and enabled them to stay on Snapchat.”
The other mistake was not building the right type of management culture.
“I believe you have to build a management infrastructure that, over time, learns how to decentralize power,” he added. “To hand off power, build a hierarchy and a campus and a company culture that can withstand the trauma and changes. I don’t think they’ve done that. That’ll be their big challenge going forward.”
Snap’s two co-founders, Evan Spiegel and Bobby Murphy, controlled almost 90 percent of the company’s voting power at the time of its IPO, and Spiegel is known as a very controlling CEO.
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This article originally appeared on Recode.net.
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