WHEN: Today, Friday, April 29, 2022
WHERE: CNBC’s “TechCheck”
Following is the unofficial transcript of a CNBC exclusive interview with Snap Co-Founder & CEO Evan Spiegel on CNBC’s “TechCheck” (M-F, 11AM-12PM ET) today, Friday, April 29th. Following is a link to video on CNBC.com:
All references must be sourced to CNBC.
JULIA BOORSTIN: Hi, Carl. That’s right. We are joined now by Evan Spiegel, the CEO and founder of Snap. Thanks so much for talking to us today.
EVAN SPIEGEL: Hey Julia, it’s great to be here. Thanks so much for having me.
BOORSTIN: So Evan, we have so much ground to cover, augmented reality ads, the new hardware that you introduced yesterday at your Partner’s Summit but I want to start with the very foundational issue of user growth. You just reported much faster than expected 20% monthly active user growth to 600 million, your daily active users have consistently been growing faster than expected. My question to you is can you keep up this rate of growth?
SPIEGEL: Well, we certainly have a huge opportunity globally. There are still billions and billions of people who don’t yet use Snapchat to communicate with their close friends and family and so, we’re very focused on that opportunity. We’ve been making lots of investments to improve our application, make it easier to use on a wider range of devices, to partner with Telcos to make our service more affordable. So there’s plenty of opportunity around the world and we’re really excited to stay focused on our community’s growth.
BOORSTIN: And what about competition with TikTok? What kind of impact are you seeing from TikTok or are there other services that are more focused on messaging that are having a bigger competitive impact?
SPIEGEL: Well, the video entertainment business certainly a huge opportunity, but it’s also very competitive. So whether it’s TikTok, or Instagram or YouTube, there’s many folks who are investing a lot in this space. We have our own competitive product called Spotlight, which we shared grew time spent 230% year over year last quarter, so we’re making steady progress there. But as you pointed out, the engagement on Snapchat is really diversified. So people are using Snapchat to communicate with their friends and family to use our AR platform with all sorts of amazing lenses to see where their friends are out at the map and discover new places to save, save and edit their memories. So people are using Snapchat in all sorts of different ways which helps us with our competitive positioning because we play such different roles in people’s lives. We’re not just a single service.
BOORSTIN: Evan, shifting gears over to your revenue outlook. You outlined how revenue growth is slowing dramatically in the wake of the war in Ukraine and all these inflationary pressures. But I want to ask you about a different revenue pressure and that is Apple’s operating systems changes. You’ve talked in the past about how challenging it has been to work around them, but have you fully addressed that issue and when, if not now, will you fully have found workarounds to that Apple iOS issue?
SPIEGEL: Yeah, we’ve been making steady progress there. I believe we shared in the lead up to the invasion, our DR revenue was, our direct response revenue was growing about 50% year over year and, you know, the full quarter year over year growth rate was actually higher than our overall revenue growth rate, which grew about 30% year over year. So we’ve been making very steady progress there. I think we also shared on the earnings call that advertisers representing about 90% of our revenue have now implemented our first party solutions that allow them to measure and optimize their advertising campaigns. So, you know, it’s going to be an ongoing journey, you know, and we expect more platform policy changes, of course, from from Google as well. So we’re just focused on serving our advertisers, making sure that they can achieve great ROI on their advertising campaigns and, you know, it’s it’s a it’s an ongoing journey. It was before the platform policy changes, and it will continue to be because we always want to be improving the return on investment for our advertising partners.
BOORSTIN: Yeah, and we certainly expect some more of those privacy focus changes ahead. But returning to those macro-economic factors, you know, there’s inflation or supply chain constraints putting pressure on advertisers, what’s your outlook for how long those pressures as you see them now will impact the business and is there anything that you’re doing to help brands work around them or make Snap more appealing considering those constraints?
SPIEGEL: Well, I certainly wish I was an economist so it’s too hard to say the macro environment is obviously very complex right now. I think when you have a nuclear power going to war, it just creates a lot of uncertainty and, and, you know, I wish I was able to predict the future but I don’t think that’s possible at this point. So we’ve just stayed focused on helping our advertisers meet their business goals, whether that’s with our video advertising and performance products or with augmented reality, which has been a huge focus of ours. We’ve seen how augmented reality try-on, for example, can drive much higher conversions for advertisers. And so we’ve been working to scale that out including with some announcements yesterday at our Snap Partner Summit. We’ve found that brands often say, gosh, you know, I want to engage with augmented reality, but I don’t have a whole catalog of 3D assets. How can I get involved with my 2D product catalog? So we released a product that allows advertisers to bring their 2D product catalog into augmented reality and enable product try-on with those 2D images so that users can try-on thousands of different looks or outfits without ever changing their clothes. And, of course, that helps with exploration and consideration, but also higher conversion and that’s something we’re really excited about.
DEIRDRE BOSA: Hey Evan, good morning. It’s Deirdre. I got to ask, what do you make of what’s going on over at Twitter? Do you see Elon Musk’s takeover as perhaps an opportunity for Snap to gain advertisers or users or even engineers amid so much uncertainty or do you think that he could ultimately change the whole landscape that could make it more difficult or different for you to compete?
SPIEGEL: It’s hard to say because the platforms are so different, you know, Twitter is this public square and Snapchat’s about communicating visually with your close friends and family. So, you know, I don’t think there’s a lot of overlap. I think the strategies are going to continue to be very different, but who knows, you know, Elon is so passionate about the Twitter product, and I’m excited to see what they come up with over there.
JON FORTT: You guys are announcing this Pixy drone for $230 in a way that seems a lot more practical to me even than Spectacles. What’s the role of this kind of hardware in your strategy? I mean, it doesn’t seem like you’re looking to do mass market, Apple or even Sonos numbers with these things. Should we think of this even in terms of how Roku is using a hardware or is it more inspirational?
SPIEGEL: Well as a camera company, we’re always experimenting with evolving what the camera can be and what we learned with Spectacles when we first released them is that people love capturing hands free video because they can explore the world without having to hold their camera in front of their face. So we started experimenting with free flying cameras because they give you a totally new perspective. They situate you in your world with your friends, and they allow you to create a totally new type of content. So it’s still an early experiment, but it’s a really fun product and and I think people are really going to enjoy playing with Pixy.
BOORSTIN: But what can we tell from this product or learn from this product in terms of what your strategy is going to be for hardware going forward? Will there be many more devices that you’re launching and do you see some of them as being mass market plays?
SPIEGEL: Potentially mass market plays over time, but the important thing with our strategy is just to extend the software experience that we have in Snapchat with hardware. That that’s the case of course with Spectacles. We found that using augmented reality on this tiny little screen where you have to use your thumbs just isn’t as compelling as overlaying augmented reality in the world around you, being able to walk around and use your hands and your voice to interact with all sorts of new experiences. So Spectacles are a way for us to extend the engagement we see with augmented reality on Snapchat today where over 250 million people are engaging with AR daily just in Snapchat alone. That doesn’t include our camera kit partners who have taken our augmented reality tools and embedded them in their own applications and services. So hardware for us is really a way to extend the core of our business and to see how we can, you know, unlock new engagement in the future.
BOORSTIN: Now at your your event yesterday, you unveiled all sorts of new augmented reality tools for advertisers specifically focused on ecommerce and you also had some pretty impressive numbers about how many people are already using lenses to try on clothes? Draw the connection between us between those lenses and advertising on the platform? Are you seeing that kind of technology actually increase ad spending?
SPIEGEL: Yeah, this has been really exciting for us. What we saw very early on, you know, we’ve been working on AR inside of Snapchat for seven or eight years now I think and what we found is that people were using augmented reality to express themselves, right? Whether they were vomiting a rainbow or trying on a pair of virtual glasses and so as we partnered with brands, we found that bringing their products, you know, whether those are accessories or clothing or, you know, a new pair of sunglasses into augmented reality allows people to express themselves with that product, but also see how it looks on them. And when they can see that something’s a good fit or complements their style, they can easily, you know, convert in one tap from that AR experience. So what we’ve seen brands do is build these AR lenses that allow people to try on their products, add them to their brand profiles, so they’re easy for people to find and experiment with and then they’re buying distribution for those lenses in our carousel, our lens carousel, which is in our camera and Snapchat, as you know, opens into the camera so it’s a really big advertising opportunity for us because our advertisers are front and center in the Snapchat lens carousel allowing people to try on and play with their products.
BOSA: Yeah so Evan, you are making this big bet on augmented reality and you had recent comments about the metaverse which you said was pretty ambiguous and hypothetical. What makes you so sure about AR? I mean you could make the same argument for the internet in the early days hypothetical and ambiguous. Why not hedge? Why solely focus on AR?
SPIEGEL: Well, I think what’s so exciting about augmented reality is, as I mentioned, 250 million people are already engaging with AR on a daily basis in Snapchat. There are hundreds of thousands of developers, there are more than two and a half million lenses that developers have created on Snapchat. So, it isn’t hypothetical. It’s real today and our community is really getting a ton of value from our augmented reality experiences. So, we’re really doubling down on that momentum and continuing to expand our service. And you know, what really I was referring to, technology is complicated enough so we don’t like to use fancy words at Snapchat. We just like to speak directly with our community about the products that we’re creating.
BOORSTIN: Well Evan, I’m sure you use fancy words sometimes. But of course, when we talk about the metaverse, we have to talk about what Mark Zuckerberg is doing at Meta and the fact that they’re recently been talking a lot about bringing this Metaverse Horizon Worlds into this 2D world and trying to make it more accessible without those VR headsets. What do you make of Meta’s moves and do you see it as more of a competitive threat coming into your AR space?
SPIEGEL: Well, I haven’t seen anything yet. So, you know, I’ll be eagerly awaiting some of their product developments. We’ll we’ll see what happens.
BOORSTIN: Well, we look forward to hearing more from you and getting the latest and also trying out that very cool flying camera ourselves. Thanks so much for joining us Evan Spiegel on the heels of all of those announcements yesterday and your earnings last week.
SPIEGEL: Thanks so much, Julia. Take care.
