Snap (NYSE: SNAP) CEO Evan Spiegel spoke at Vanity Fair's New Establishment conference yesterday. Among other topics, the 27-year-old CEO admitted that he didn't fully realize how important it was to communicate better with investors. Taking a private company public is a daunting task, and does come with considerably more regulatory oversight, especially when it comes to disclosures and corporate communications.
Here's the relevant excerpt from his interview with Walter Isaacson:
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The admission comes after Spiegel has made several embarrassing gaffes on conference calls, which are some of the most important regular opportunities for investors to hear directly from management. It's worth remembering some of Spiegel's remarks that didn't sit well with investors.
Stumbling out of the gate
Snap's first public earnings release was in May, and the related conference call didn't go so well. Spiegel downplayed competitive fears regarding Facebook that were (and are) absolutely legitimate concerns. When asked about Facebook seemingly wanting to "bury Snapchat," Spiegel instead emphasized the value of creativity on his company's platform and then made a bizarre analogy: "And I think at the end of the day, just because Yahoo!, for example, has a search box, it doesn't mean they're Google."
The problem with dismissing these concerns is that the numbers speak for themselves. Instagram Stories overtook Snapchat in daily active users (DAUs) less than one year after launch. His response was widely criticized, and Jim Cramer called Spiegel "arrogant" for brushing aside investor concerns.
An analyst then asked what Snap was doing to broaden the appeal of Snapchat, since the interface is unintuitive and Snapchat has trouble appealing to older demographics. Spiegel's response was contradictory, saying the service can be "universally appealing" but then essentially saying that Snapchat doesn't even try to cater to older demographics because of an experience he once had with his grandmother:
Then there was Spiegel's now-famous remark deriding competitors for "growth hacking," where social media companies generate engagement through push notifications. Many companies do this, including Snap, so the criticism came off as hypocritical. Making matters worse, Snap also refused to provide financial guidance, which is incredibly important for such a young company. Investors want visibility, but Snap won't provide it.
"I didn't even understand his response!"
The second earnings call went slightly better. The most embarrassing part came when an analyst inadvertently left their mic on. BTIG analyst Rich Greenfield referenced the growth hacking comment and asked Spiegel to clarify how Snapchat's push notifications don't qualify as "growth hacking" while rivals' do. Spiegel responded:
Thinking his mic was muted, Greenfield's colleague Brandon Ross yelled out, "I didn't even understand his response!" When one of the highlights of an earnings call is an analyst inadvertently mocking your response, it's safe to say that you have some work to do on the communications front.
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