WHEN: Today, Wednesday, February 7, 2024
WHERE: CNBC’s “Money Movers”
Following is the unofficial transcript of a CNBC exclusive interview with Snap Co-Founder & CEO Evan Spiegel on CNBC’s “Money Movers” (M-F,11AM-12PM ET) today, Wednesday, February 7. Following is a link to video on CNBC.com:
JULIA BOORSTIN: Thanks, Sara. And Evan Spiegel, CEO of Snap, thank you so much for joining us right now. You know, with your stock down by over a third this morning, I have to ask you, what’s your message to investors who seem to have lost confidence in this stock?
EVAN SPIEGEL: Hey, Julia, thanks so much for having me. It does seem like expectations got ahead of our guidance. You know, we delivered a Q4 in line in terms of revenue, beat heavily on adjusted EBITDA, and we guided to a ten-point acceleration for revenue in Q1. So, we are seeing some real progress on the advertising platform. And I think what’s most encouraging for us as we look towards the long-term of the business is that we’re seeing better performance for advertisers. So, we saw a 90 percent increase in purchase-related conversions in Q4, and we also are seeing some traction with small and medium-sized — growth in the number of small and medium-sized advertisers in Q4. So, you know, we’re seeing some real – and, of course, with small and medium-sized businesses, which gives us confidence that over time we should see revenue follow.
BOORSTIN: But you are seeing the stock now down 34 percent. Revenue came in lighter than anticipated. But it really seems like the stock’s decline is mostly because your outlook for the bottom line, for a first quarter loss, is so much worse than what analysts had anticipated. And this is even after reporting an earnings beat for the fourth quarter. So, why is your outlook so much more negative than what the street was expecting?
SPIEGEL: Well, we did factor in a one-time investment in a brand campaign that really shows how Snapchat is different than social media. Right now we’re seeing a lot of fatigue around social media. People are realizing that it’s harmful. It feels like a popularity – for your friends and family to help bring people closer together. We have a moderated content platform which, of course, is better for our community, but also for advertisers in terms of brand safety. And so I think there’s really an opportunity right now to show people how we’re different. And so – we’re improving the app –
BOORSTIN: So, Evan, we’re having some issues with your feed, Evan. We’re going to fix your feed and then get right back to you.
BOORSTIN: We are going to try to bring Evan Spiegel back in here. Evan, are you with us?
SPIEGEL: I am, Julia. Thank you.
BOORSTIN: OK, we hope that your feed has been fixed here. Since you were going back — sort of back and forth, in and out, before we lost you there, I just want to reiterate this question that seems to be the core of investors’ concern. The stock is down 34.5 percent right now. We’ve seen Meta accelerating its revenue growth where Snap missed on the revenue numbers and guided to this meaningful loss in the first quarter. Worse than analysts anticipated. What is driving the shortfall and also the differential that we’re seeing between Meta and Snap?
SPIEGEL: Well, the adjusted EBITDA guide for Q1 bakes in a brand campaign that we launched to show people how Snapchat is different than social media. I think people are feeling a lot of fatigue around social media right now. It feels like a popularity contest. There’s a lot of harmful content and folks are worried about the negative impact. Snapchat was designed differently, to bring friends and family closer together, allow people to express themselves through our camera. And, of course, our content platform is moderated, which is better for our community, but also better for advertisers in terms of providing a brand-safe environment. So, we thought it was a really important time right now to share that message and to do so when we’re seeing improved performance on our advertising platform because we think that that will help advertisers re-engage with Snap and test out our — the improvements that we’ve made so far.
BOORSTIN: Now, Evan, you’re saying that there’s fatigue with social media, but we just saw numbers with Meta that were really upbeat across the board. Do you think that you’re just at a fundamental disadvantage because Snap’s size is so much smaller than Meta’s? And how will you address that going forward?
SPIEGEL: I think the key for us is really to build a performance advertising business. Historically, we had more of a brand-focused business, and we’ve invested a lot over the last 18 months to help advertisers find success with down funnel conversions. We’ve seen tremendous growth in purchase-related conversions, growing 90 percent year-over-year in Q4, and I think that’s a testament to the improvements we’ve been making on the platform. These improvements are also translating to growth in small and medium-sized advertisers, which are really important, again, to the long-term of our business because they provide much more resilient revenue growth. So, I do think we continue to have work to do on our – our lower funnel performance advertising business, but it’s the right place to focus. We’re seeing real progress. And, you know, we’re expecting that to translate into improved revenue trends, which is why, at the top end of our guide for Q1 we’re expecting, you know, a 10-point acceleration in terms of that revenue growth.
BOORSTIN: Yes.
SPIEGEL: So, of course, you know, before we see improved revenue trends, we’ve got to see improved performance for advertisers, and that’s why we’re excited about the results we saw in Q4
BOORSTIN: Yes, I mean, you say you’re guiding to the best-case scenario for first quarter, 10 percent growth, but this past quarter, at 5 percent revenue growth, you were lagging behind the advertising growth, not just of Meta, which was at 24 percent, but also Google, Amazon, and Microsoft. So, we’re seeing such a slower revenue growth rate there despite this shift over to direct response advertising. When do you think that impact of direct response and that transition will really kick in?
SPIEGEL: I think we’re already seeing the impact in terms of improved advertiser performance, which is a key input to growing our direct response advertising business. It’s also helping us advocate for more share shifts in 2024 because we’re leveraging the results we saw towards the end of 2023 when we’re talking with advertisers about winning more budget from them. So, I do think advertisers are looking for an alternative to these very large, big tech advertising companies. They want to diversify their advertising spend, but they need to see the performance. And that’s why we’ve been investing so heavily in our direct response, especially around lower funnel objectives.
BOORSTIN: Now, you did mention that the war in the Middle East was a headwind to fourth quarter revenue. Why did it impact revenue, you know, meaningfully, 2 percentage points, and what is your outlook for the impact of the war in the Middle East going forward, and what’s your outlook for the ad market in general?
SPIEGEL: I’d say overall the advertising market is improving. That is, you know, baked into our guidance, as is the impact, you know, of the war in the Middle East. You know, and we guided at the high end of – of our revenue, a guide for Q1 of 15 percent year-over-year revenue growth, which is a meaningful acceleration from the 5 percent that we saw in Q4. So, I do think, overall, the – the trends are improving and we are making real progress in – in terms of improving our ad platform.
BOORSTIN: Now, you’ve also been working on improving your costs. You just announced on Monday that you’re cutting 10 percent of your worker base. And this is from an employee base that’s already 20 percent smaller than it was at its peak a couple years ago. What are your further plans for cost cutting? Do you think there are more layoffs ahead?
SPIEGEL: Well, these changes are always really difficult to make. I’m going to miss, you know, our departing team members. But for us, what we’ve seen is, is real impact from, you know, improving the focus of our execution by removing management layers. That’s helping us move faster. And we’re also putting a real focus on in-person collaboration and working together at our major hub offices. So, I do hope that this will translate into improved execution. I’m excited about the progress we’re making, but I’d like us to move faster and I’m hoping that these changes will help – help us do that.
BOORSTIN: And just a final question on your subscription business. You added 2 million subscribers to Snapchat+ in the quarter. You announced a nearly $250 million annualized revenue run rate. Can you give us a sense of how big you think that business can be and what your outlook is for revenue and profitability there?
SPIEGEL: When we launched the service, we set a medium-term goal of 10 million subscribers. We’re well on our way there. You know, we’ve exceeded 7 million subscribers in Q4 with a run rate of $249 million in revenue. I think that’s really helped us, you know, work through this transition on the ad platform as well. It’s provided a bit of a cushion as we’ve really ramped up our investments in infrastructure, particularly related to machine learning and AI. We’re running a lot bigger models using a lot more of these privacy-safe signals. That’s making a big difference for our ad platform. And one of the reasons we’ve been able to pay for those investments is because we’ve seen such success with Snapchat+ in really a short amount of time. So, it’s hard to say what that business can become over the long-term, but as we look at some of these generative AI tools we’ve launched recently, Snapchat+ is a great entry point to those, you know, AI editing tools that help people make, you know, make Snaps or edit their Snaps before they send them to their friends.
BOORSTIN: Well, Evan, we appreciate you taking the time to talking to us this morning and your patience with the technical issues. Evan Spiegel, CEO of Snap, thanks so much.
SPIEGEL: Thanks, Julia.
