In February 2013, Jurgenson wrote about Snapchat: “The tension between experience for its own sake and experience we pursue just to put on Facebook is reaching its breaking point … that breaking point is called Snapchat.” After reading the piece in The New Inquiry, a nonprofit digital magazine, Evan reached out to Jurgenson and convinced him to join Snapchat as a researcher. It is rare for a startup to hire someone so early just to focus on research and new thinking that may not be directly relevant to a product. Jurgenson would speak with Evan often, and Jurgenson’s thoughts and writing eventually had a significant impact on the way Evan thought about Snapchat, social media, and the internet more broadly. Evan would frequently quote Jurgenson and discuss his ideas in interviews with journalists.
Snapchat also needed more engineering firepower, so they hired seven new engineers, almost all from Stanford, and two designers to work with Evan; like Evan, Bobby, David, and Daniel, most were interested in art or music as well as coding, and many had been involved in Greek life at school.
All these young engineers needed more experienced leadership, so Evan recruited longtime Amazon engineer Tim Sehn to become VP of engineering. Sehn had joined Amazon in 2001 as an intern and quickly rose through the ranks; at one point he was responsible for the performance of Amazon’s main website, and later he moved on to maintaining Amazon Web Services. Sehn’s recruitment was crucial, and his willingness to join Snapchat showed the hiring power Evan and Bobby enjoyed as the hottest new startup in the tech world.
Phillippe Browning next joined the team from CBS Mobile to head up monetization at Snapchat; Evan had been redirecting every email he received from marketers to a dead-end mailbox. Now, at the very least, Browning would handle them. Although Snapchat ignored marketers, companies were beginning to test the app’s capabilities.
On New Year’s Day, 2013, the frozen yogurt chain 16 Handles ran the first promotion on Snapchat. The company’s community manager noticed that Snapchat had gained traction with 16 Handles’s core demographic of pre-teen through early twenties consumers. He suggested to his boss that the frozen yogurt chain run a promotion on the nascent app. If customers added 16 Handles on Snapchat, a 16 Handles employee would take a picture of a coupon code with a discount of 25 to 100 percent off, and send it to that customer. The customer would then show it to the cashier right away (before it disappeared in 10 seconds) and receive the discount. The promotion, dubbed “Snappy New Year,” was only tested for a few hours across three stores, but 16 Handles estimates that it drove about $1,500 in sales. While a small moneymaker, 16 Handles had shown that businesses could convert captive audiences on Snapchat into real dollars.
In May 2013, Taco Bell became the first major advertiser to create a Snapchat account and interact with customers. Taco Bell had poached the 16 Handles community manager who came up with the “Snappy New Year” campaign. On May 1, the company tweeted “We’re on @Snapchat. Username: tacobell. Add us. We’re sending all of our friends a secret announcement tomorrow! #Shhh.”
The next day, Taco Bell sent their Snapchat friends a photo of a burrito; they had used Snapchat to draw “Hi Friend” and “5-23-13” over the photo in lime green ink. The ad suggested that Taco Bell’s new burrito would hit stores on May 23.
“People are obsessed with Beefy Crunch Burrito so Snapchat seemed like the right platform to make the announcement,” Taco Bell director of social and digital media Tressie Lieberman said at the time. “Sharing that story on Snapchat is a fun way to connect with the fans that we are thrilled to have. It’s all about treating them like personal friends and not consumers.”
Soon, Taco Bell would have a much more powerful way to advertise on Snapchat, as Evan prepared to unveil a storytelling tool that he, Bobby, and the rest of the team had been debating for almost a year.
CHAPTER FOURTEEN
STORIES
SEPTEMBER 2013
VENICE, CA
Whenever Evan, Bobby, David, Daniel, or anyone else at Snapchat asked users what additional features they wanted, the response was universal. From Oslo to Santa Monica, users wanted group messaging. Tired of combing through their lists of contacts to send a funny picture to everyone in their clique, users wanted to be able to create a group the way they could in text messages and other messengers.
But Evan and the Snapchat team worried that group messaging could kill the magic of Snapchat. If users could easily fire off mass Snapchats to big groups of people all the time, it might destroy the vibe they had worked so hard to create. Was there a better way to create a one-to-many sharing tool than group messaging?
Evan and his team knew what they didn’t want to create. One of Evan’s strengths is his ability to see issues in his social feeds and circles and extrapolate them broadly to get into the heads of his users. When users first signed up for Facebook, it was amazing. All their friends were on it, and they could post funny things and goofy pictures. But all these posts built up over time and started becoming representations of people—their so-called “personal brand.” It turns out it was a lot of work to curate a personal brand that spanned many years and was cool to your peers and acceptable to parents and work colleagues—not to mention future friends and colleagues who might want a different you.
At some point were you supposed to go back and unlike Sean Paul? Or would your friends understand that ten years ago the song “Temperature” was just that good? What about seventeen “new phone, need numbers” groups? Is there a button for deleting every photo of you before 2011? Why did you think that haircut was a good idea? And so users started posting less frequently and started sharing news articles instead of silly pictures. The spontaneity, goofiness, and lightness of social media was replaced; instead of throwing Polaroids at friends across the room, you were curating a gallery of professionally framed, high-gloss photos.
A Snapchat rebuild of the newsfeed would obviously have to be impermanent—all of the content would disappear at some point, like the disappearing messages. That way users would feel comfortable posting whatever suited their mood in the moment without worrying about how it would look months and years later. To get away from the manicured photos filling Instagram and Facebook competing for likes, Snapchat’s feed would do away with likes and comments. Users could post whatever they wanted, and if their friends really wanted to respond, they could send them a reaction Snapchat.
And so, in October 2013, nearly a year after they had seriously started discussing the idea, Snapchat Stories was born. If users tapped to the right after opening the app—it still opened straight to the camera, as usual—they would see a list of their friends, with a circular thumbnail on the right side of each name. Holding their fingers down on a friend started a slideshow that played content in the order that it was posted rather than in reverse chronological order, like many feeds. Evan, having studied journalism at Crossroads, was obsessed with Stories being able to show a narrative, as users could really tell rich stories mixing photo and video rather than just posting a couple photos from their night out. Content would appear for twenty-four hours then disappear. If a friend’s story was dull or too long and dragged on, users could just tap it to skip ahead. With no likes and comments, there was no need for a sorting algorithm, like those found on Facebook, Instagram, and Twitter. Content would just appear based on who had posted most recently—an added incentive to post more often.
Without likes and comments, Snapchat’s new feature needed a different way to reward users for posting and capture its users’ psychological craving for attention. With Snapchat messages, the sender could see when the other person opened it (I have their attention!), and the recipient knew the sender had scrolled through a list and manually touched their name to send it to them (they chose me!). With Stories, users could see a list of names of everyone who viewed their story.
Evan argued that it was awkward and insincere when people pretended in real-world interactions that they hadn’t been watching their friends’ lives unfold via social media; so, he
argued, why not just show people who’s watching their stories. There was some concern that this would deter people from watching as many friends’ stories, but ultimately they decided this risk was worth taking for the tradeoff of addicting users to seeing all of their friends who had watched their story. This list turned out to be psychological candy for users, as they could scroll through and see exactly who had watched their story. This phenomenon was by no means new—Myspace founder Tom Anderson said the number-one feature that Myspace users begged for was “who’s viewed your profile.”
Even though Evan, Bobby, and the team had debated, prototyped, reworked, and iterated for a year on Stories, there was still a significant risk when they launched that it would flop—or worse, that it would hurt Snapchat’s growth and success with messages.
“Snapchat may not look much like Facebook, but with Stories, the company is taking its first steps toward competing with Facebook’s most important product: News Feed,” Ellis Hamburger, who would later work for Evan at Snapchat, wrote about Stories’ launch for the Verge. “Behind Stories is a deep understanding, or perhaps loathing, of the way social apps work today. Spiegel claims to have no special knowledge of the way we work as social organisms aside from what he learned as a college student, but has thus far proven himself and his colleagues to be surprisingly thoughtful about our hidden social behaviors and desires. Stories is the next big piece of how Snapchat thinks social media should work, and everybody’s watching.”
Much like Snapchat’s ascent in early 2012, Stories caught on slowly at first as users played around with it and learned the new medium; but once they had grown comfortable with it and accustomed to their friends posting and watching this still-disappearing content, Stories caught on in a big way.
The brilliance of Stories was everything that wasn’t in it; with no permanence, fancy editing, likes, follower counts, or comments, users could post whatever they wanted. No one else’s Stories were these amazing, manicured productions, so most people felt comfortable sharing silly videos and selfies. It was also easier to pull Snapchat out of your pocket, record a video of your friends, and post it to your Story—much easier than taking the perfect picture in the most attractive lighting and picking the best filter and writing a witty caption. The cost of sharing was incredibly low, both mentally and socially. So people shared a ton of content on Stories.
Because users couldn’t upload photos or videos from their phone to Snapchat—they had to record them in Snapchat and immediately send them to friends or post them to their story—it became the best way to see what your friends were doing in close to real time. As my friends started using Stories more and more my senior year at Stanford, I started to have an ambient sense of where people were on campus. I would watch friends’ stories and see that a dozen of my friends were drinking by the Arillaga pool while Sam and David were on the golf course, and Zach was bored to tears sending goofy selfies from the library.
Stories made young people feel like reality TV stars and celebrities; they’d go to class or out to a party or on vacation and post a bunch of photos and videos and be able to see how many dozens or hundreds of people were watching their life. It became an easy, lightweight way to stay in touch and see what friends at other colleges and in other cities were up to and, at times, to live vicariously through them. You could see—even feel—a Kanye concert without even going to the show. College students studying abroad would take a whole series of Snapchats with their phone on airplane mode and then post them all when they connected to a WiFi network (Snapchat saved uploads that wouldn’t post due to cell service for up to twenty-four hours, but the content still expired twenty-four hours from when it was taken).
Stories and messages created a powerful double-piston engine for Snapchat. Messages pulled people in—your friend has sent you a Snapchat. Stories filled a boredom void—what are your friends up to? This made it much, much harder for companies like Facebook, Google, or Apple to simply add ephemeral elements to their messengers or copy the app to wipe out Snapchat.
And both pistons drove growth in a big way. Snapchat had these little features, like being able to turn the colored pen to white or black or changing the size and color of text. Like In-N-Out Burger’s secret menu, these attributes were well known to the regulars and the cool crowd, but there was no text or help from Snapchat alerting the average user to its presence. So teenagers would ask, “How did you do that?!” and show each other how to use new and hidden parts of the app. They would also talk about who had good Snapchat stories and whose were bad, what cool things people did, and Oh did you see what happened on Caitlin’s story? Once again, it all added up to a simple fact: if you didn’t have Snapchat, you were missing out.
Snapchat looked like an insignificant toy when it launched, but was actually a big improvement in communication for many people. The more you used it, the more fun and addicting it became. Quickly, it started replacing conversations and content that previously took place via text messages or on social networking sites. As its user base and community grew larger and more devoted, Snapchat was able to build out Stories and gain a larger share of content that users previously posted elsewhere. Like Facebook, Snapchat had boundless ambition flowing down from its founder down through the ranks of the employees. But people only had so many photos to post and so many hours in a day to watch.
On October 30, Facebook chief financial officer David Ebersman noted during the company’s earnings call that Facebook “did see a decrease in daily users specifically among younger teens.”
It was the first time the company had told investors it was having any trouble with its young teen users.
Zuckerberg realized he had to take one more shot at acquiring Snapchat.
CHAPTER FIFTEEN
HOW TO TURN DOWN THREE BILLION DOLLARS
NOVEMBER 2013
VENICE, CA
As the Neon Trees song “Everybody Talks” blares over the set of CNN’s New Day, host Michaela Pereira greets her audience, “I’m thinking back to when I was twenty-three, would I have turned down THREE BILLION DOLLARS? That’s precisely what Evan Spiegel—he’s the young CEO of Snapchat—has done.”
“We turn to a made in America success story with a twist,” Diane Sawyer said on ABC World News. “Imagine you’re living with your parents when you have a great idea. An idea so good that Facebook offers you billions in cold cash to buy it. So how is it possible the two guys turned the money down?”
Weeks earlier, Mark Zuckerberg had reached out to Evan again with an offer: join us at Facebook. Build your vision of Snapchat with our resources and enormous userbase. The total package Facebook offered, if Snapchat hit certain performance targets, would be well north of three billion dollars.
Evan and Bobby, each of whom owned about 25 percent of the company at the time, would have received hundreds of millions of dollars apiece if they had sold. They also maintained the majority of voting rights in the company. Evan and Bobby went back and forth on the decision, sometimes favoring the exit, other times wanting to see how big they could make Snapchat on their own. Snapchat still had zero revenue and didn’t even have a proven business model.
Behind the scenes, Zuckerberg called Matt Cohler, one of the first five employees at Facebook and now one of Snapchat board member Mitch Lasky’s partners at Benchmark, to see how he could influence Snapchat’s decision. Lasky had an interesting parable to draw upon—Benchmark was an early investor in Instagram, and many thought Instagram would have been worth far more in a short time had it remained independent instead of selling to Facebook. As Evan wavered on their decision, Lasky wondered aloud to fellow board member Michael Lynton about “how much of [Evan’s actions are] window dressing for me and how much of this is real,” meaning Lasky wasn’t confident that Evan was being fully truthful with him.
At the end of the day, could Evan really see himself working as a Facebook employee, heading to the Menlo Park campus every day to work for Zuckerberg? Wouldn’t it be more fun to ru
n Snapchat on his own down in Venice? If he turned down Facebook and ran Snapchat poorly, he would probably never get an offer this big again. But if he sold Snapchat, he would probably never again have an idea this great. Once again, Evan and Bobby turned Zuckerberg and Facebook down, opting to stay independent in Venice.
As he was talking with Facebook, Evan was wooing investors for a Series C round of funding, seeking a high price tag. These acquisition and fundraising conversations often happen simultaneously, as the two processes are not too dissimilar; Instagram closed its large Series B round just days before it agreed to sell to Facebook. Evan scared off several firms from this round, as he was seeking a $4 billion valuation just months after the company had been valued at $800 million.
Evan proposed one deal with Chinese e-commerce company Tencent and Russian investment firm DST Global that would include a sale of $40 million of Evan and Bobby’s shares, just months after they each unloaded $10 million of their equity. These terms made investors uneasy because it seemed like Evan wanted them to shell out for a high price tag and believe in his long-term vision while he sold more of his stock.
When Mitch Lasky heard about these terms, which were the exact opposite of what Evan had told him days earlier about a possible secondary,1 he confronted Evan. “Well I just turned down a billion from Zuck,” Evan replied.
How to Turn Down a Billion Dollars Page 12