How to Turn Down a Billion Dollars

by Billy Gallagher

  * * *

  Evan aligned his strategic vision for Snapchat—a blend of technology and art and a culture of constant experiments—with the physical layout of the company’s offices. Snapchat’s scattered campus of disparate buildings lends itself to a secretive, siloed company structure.

  Instead of building a central headquarters like Facebook or Google, Snapchat spent years buying up little offices wherever it could get them, signing leases all over Venice, Santa Monica, and Marina del Rey. Evan moves in between Snapchat’s various offices in a black Range Rover accompanied by his security detail. Snapchat’s main offices are a cluster of one- and two-story buildings on a one-block stretch of Market Street, barely a block from the beach in Venice.

  On Market Street, Snapchat’s main office houses the design team, executives’ offices, business operations, administrative staffers, and cafeteria. Entering the lobby of the main building, you can look up and see into Evan’s glass-walled office on the second floor. Alternatively, he can look down from his office to see anyone entering Snapchat. Two Segways stand near the front desk, complete with nameplates for Evan and Bobby. Eventually, the company grew too big for everyone to fit in the cafeteria, so teams of Snapchat employees started flooding into the local Venice restaurants, grabbing Peruvian takeout from El Huarique or poke bowls from The Poke Shack.

  Evan hates the expansive, all-company open-floor plans that many tech giants favor, preferring places where small groups can be in the same room. Each team works in the same room, but only with their team, not the entire division or company.

  Evan has arranged for artists who inspire him to decorate Snapchat’s offices. Inside, the exposed brick walls are covered in illustrated portraits of Tina Fey, George Clooney, Andy Warhol, Nelson Mandela, Daft Punk, and other celebrities. Every one of the stars is portrayed through a phone screen taking a selfie. In August 2013, a friend of Evan’s had been meeting with Paramount Television president Amy Powell and snapped a portrait of Steve Jobs in her office to him. Evan loved it and tracked down the artist, ThankYouX, aka Ryan Wilson. Now, a dozen of Wilson’s “Selfie Portraits” hang throughout Snapchat’s office, with a thirteenth, a portrait of Steve Jobs that Wilson made for the first time he met Evan, hanging in Evan’s office.

  Evan gave Wyatt Mills, an artist he knew from Crossroads, a tour of Snapchat one day, and Mills noticed that the exterior walls were blank and boring. Evan told him to pick one and improve it. Mills painted an enormous bright mural on one of the walls above three archways.

  Evan very intentionally chose Venice and Los Angeles to escape Silicon Valley. But he may be turning Venice into a second Silicon Valley. Resentment for Snapchat and tech in general is building in Venice and the surrounding area, mirroring long-simmering issues between tech and the community in San Francisco.

  A good deal of Snapchat’s impact on Venice and the Los Angeles startup scene has been positive. It is attracting high-quality talent and venture capital money to Los Angeles, making it easier for other startups to recruit. Years down the road, if Snapchat has a successful IPO, employees will eventually leave the company to start their own startups and become angel investors. The community will grow and grow as the rising tide lifts all boats.

  But Snapchat’s success has also led to rising rents and gentrification that has pushed out some longtime residents of Venice. One of the reasons Evan initially liked having Snapchat in Venice was that employees could talk openly about work at a bar without worrying about being overheard by competitors, journalists, or other people in the tech ecosystem. The town that had previously attracted the artists, writers, poets, and beatniks now attracted young professionals looking to strike it rich in the tech world. Snapchat thrived in Venice because no one cared about tech or apps. Now, Snapchat is undeniably changing that.

  CHAPTER TWENTY-FOUR

  DISCOVER

  JULY 2014

  VENICE, CA

  Snapchat was meant to be the private network, not the social network.

  Evan wants users to share frequently with their closest friends, not with thousands of people. Snapchat has fantastic user-generated content in the photo and video compilations people post on their stories. But if users ran out of friends’ stories to watch, they would get bored and leave the app, or add more ancillary friends, or even media organizations and personalities who they didn’t know in real life. Content is at the heart of every social network, from your friend’s lunch on Instagram to the president’s tweets to an article your aunt posts on Facebook. And a neverending supply of this content keeps users engaged for as long as possible so these networks can show users advertisements.

  On Facebook and Instagram, users saw content from three different groups—close friends, acquaintances, and professional content creators—all in the same feed. Evan wanted nothing to do with content from acquaintances. Snapchat would offer messaging and Snapchat Stories for interacting with your close friends, while Snapchat Live and a new product, Discover, were specifically for watching third-party content.

  Every social network eventually gets infiltrated by brands, advertisers, and media companies seeking to meet audiences where they hang out. What would this professional content look like on Snapchat? If they could build a sandbox for media publishers and advertisers early on, offering them their own area of Snapchat, maybe they wouldn’t pollute the fun feed of Snapchat Stories.

  Evan has long had an intense interest in journalism, dating back to his days taking a journalism class and selling newspaper ads at Crossroads. Like many in the media and in technology, Evan felt that social media had made speed the focus over all else, including accuracy and quality, and that too many feeds were clogged with clickbait headlines dressed up to make users click on low-quality work. He dreamed of a world in which publishers produced higher-quality journalism that attracted a strong, loyal audience that brands could advertise to, all of which would occur in a separate section of Snapchat to keep the Stories feed unpolluted.

  So in early 2014, Evan started meeting with the CEOs of media companies and offering them a simple proposition: make content exclusively for Snapchat, host it in our app, and we’ll share the ad revenue. He spoke with executives at mainstream media companies like CNN, ESPN, ABC, Daily Mail, Comedy Central, Cosmopolitan, National Geographic, People, Glamour, GQ, and Wired; upstarts like BuzzFeed, Vice, Mic, NowThis, Deezer, Right Now, and CSS; music companies like Spotify, Rdio, Soundcloud, Warner Music Group, and Vevo; and even video-on-demand service Hulu.

  Snapchat came along at a time of dire need for publishers. The media world had woken up to the reality that readers were increasingly spending their time on mobile and in apps rather than on websites. Even worse, readers were using a small number of apps regularly, and most didn’t bother to download publishers’ apps. It wasn’t just that people weren’t picking up the newspaper anymore—they weren’t visiting newspapers’ websites anymore. Just as the web destroyed print subscriptions, mobile would rock the tenuous equilibrium publishers had reached online. Publishers started to push content across platforms to meet readers where they were spending their time.

  The best product available to publishers was Facebook. It had a massive user base both on the web and on mobile and offered extremely relevant advertising that commanded high rates. Publishers had tried to take their old browser-based business model and shove their display and banner ads onto mobile, which wasn’t working well. As Evan understood with the camera opening and the speed of delivering snaps, speed is everything on mobile. Every millisecond users waited for content to load, they thought about switching apps.

  So Facebook created a new product called Instant Articles, which allowed publishers to create faster-loading, more aesthetically pleasing articles that lived within Facebook’s walled garden. Instant Articles launched in May 2015, but, similar to how Snapchat approached the time leading up to the launch of Discover, Facebook employees had been talking with media partners for months prior to the launch. Publishers were appreh
ensive about handing over their customer relationships to Facebook, especially since the social network had always made it clear that users would come first ahead of publishers. While it would be best for publishers themselves to control their relationships with customers, it would be much better for them to work with two or three technology giants than be at the mercy of one monopolistic power.

  In this environment, publishers welcomed Snapchat’s creation of a media product. More than merely serving as an alternative to publishing on Facebook, Discover offered media companies their own space on a virtual magazine newsstand inside Snapchat. Publishers could create dynamic daily magazines for millions of Snapchat users. The company was growing so fast that it offered media companies huge upside with little downside.

  In April 2014, Snapchat hired Nick Bell away from News Corp. to run the media division. Bell and a new team he assembled, including Josh Stone, an alumnus of both Crossroads and the Kappa Sigma fraternity at Stanford, and Nicole James, the blogger who first wrote about Snapchat back in July 2011. Chloe Drimal continued to run the Live Stories part of content. Evan was involved very early on in Discover, in the initial pitches to publishers; he then handed the project off to Bell, an influential executive in the company who quickly became part of Evan’s inner circle.

  Content creators from the aforementioned publishing companies were invited down to Venice to pitch Bell, Stone, and the rest of the team on what their Snapchat channel might look like and what kind of content they would put on there. Most of them produced mock editions and were either invited to join the platform or asked to produce more samples to prove themselves. Snapchat was highly secretive about who else they were asking to join Discover, although they liked to show logos of highbrow organizations like The Wall Street Journal in sample materials to lend the new platform some credibility.

  Initially, Evan had hoped to go live in the summer, but he quickly learned that the timeline was too ambitious to build the feature for users, build a backend publishing tool, and get media companies on board. So he prepared to launch Discover in October 2014. The team was laying the track while the train sped down it, building the product as they signed on content and ad partners and together figured out what Discover would be. Throughout the summer, the Snapchat team was going back and forth with potential publishers, reviewing examples of art boards of what editions might look like and deciding how it all would function and how many stories publishers would post per day. The most controversial decision from Snapchat was that publishers weren’t allowed to put links in their stories; unlike Facebook or Twitter posts where they could direct readers to their own websites, everything in Discover would live there, and only there, without users leaving to publishers’ kingdoms.

  “Discover was created to provide clarity and curation around the most inspiring, informative, and entertaining subjects,” the company told publishers in a presentation. Each publisher would produce a daily edition made up of several pieces of content. They were given three principles to follow: keep it simple, mix it up, and make it immersive. Each edition was made up of several stories, each of which featured a top image or short video as a teaser, with more content—longer video, more photos, text articles, etc.—if the user swiped below a story. While they had debated throughout the summer about making Discover something that could be constantly updated like other social media, the Snapchat team ultimately decided to make it static, more like a magazine issue than traditional social media posts. Like a great music album, a great Discover edition would ideally be composed of beautiful individual tracks that came together to tell one powerful, enjoyable story.

  Nick Bell, Josh Stone, and Nicole James would meet with publishing partners—always individually, never bringing publishers together—and give them feedback on the sample editions the publishers had been producing. Most of the feedback was their individual editorial commentary and never based on research or focus groups.

  The early prototypes of Discover were unnecessarily clunky and complex. Users would have to hold their finger down while watching Discover, meaning publishers would have to make sure users had a place to hold their finger without covering an important part of a story. This kept Discover aligned with how the rest of Snapchat worked (once you lifted your finger, content stopped playing), and Evan loved to talk about how engaged users were—after all, they were literally touching the content on the screen. But did it make sense to force users to hold their fingers down while asking them to watch longer videos from CNN or Vice?

  Unlike the nascent Snapchat, which went live looking, well, just downright ugly, the more mature company took time to revise Discover and iron out most of the kinks before releasing it to the world. Over the summer, they dropped the requirement for users to hold down their finger, not just for the secret Discover feature, but for all of Snapchat. A pull-up menu with options for users to share content or tap down to see a longer story or video got simplified to a simple swipe down for longer content and tap-and-hold to share to other users. An inelegant, multitiered graphic overlay system got whittled down to simply adding graphics to videos and pictures.

  The Snapchat team was still furiously working to build the platform. In many meetings, Nick Bell or Nicole James would pitch a new feature, like a video uploader, to publishers; but these new features were often just a mockup of what Snapchat was building, and publishers couldn’t actually try them out because the engineers didn’t have them working yet. The original publisher tools were slow and barely worked; if ESPN uploaded a Discover edition that had an error in it, they couldn’t edit anything in the Snapchat system—they had to go back and fix it and then reupload an entirely new version. Between these problems and the changes to the product, development time kept slipping, and Snapchat had to push the October launch date to January 2015.

  Eventually, Snapchat built a full-fledged content management system (CMS) for publishers and an app for them to preview how editions would look to users. The team had to teach creators how to take content that had been shot for TV or other widescreen formats and adapt it to Snapchat’s vertical video style. Users didn’t want to turn their phones sideways to view a video in full screen, so Snapchat offered them full-screen vertical video. Snapchat taught publishers how to cut and reformat existing video to vertical, but really they hoped that publishers would start shooting content in a vertical format specifically for Discover.

  Snapchat rebelled against the data-driven, scalability-focused approach that Silicon Valley loved, such as Facebook’s algorithmic attention to its News Feed and Trending topics sections, and required that human editors add everything on Discover. “There’s a sort of weird obsession with the idea that data can solve anything,” Evan once said. “I really haven’t seen data deliver the results that I’ve seen a great editor deliver.”

  Initially, the team took this ideal too far, though, as they didn’t build analytics-reporting tools into the platform until publishers asked for them. These analytics started off as a very rudimentary, engineer’s look at activity: a daily Excel spreadsheet showing metrics like how long users had spent in the publisher’s edition and how many views each individual story had gotten. Eventually they grew this out into a reporting suite with actionable insights on things like what text placement and colors worked best and what types of stories made users leave in the largest numbers.

  As Nick Bell and his team continued negotiating with publishing partners, Snapchat put together a team of its own to publish on Discover. As they were teaching publishers how to create content for the platform, the obvious became unavoidably clear: no one understood Snapchat users better than the people working at Snapchat. So why not create a Discover channel themselves? They could simultaneously show publishers how to win on Discover and create a popular channel for the company to profit from. Once again, Snapchat cast itself within the Hollywood/Netflix crowd rather than the Facebook/Twitter/Silicon Valley crew that favored agnostic platforms that did not create any content.

  Snapchat h
ired Marcus Wiley, a former Fox executive who led the development of comedies like New Girl, Brooklyn Nine-Nine, The Mindy Project, and Bob’s Burgers, to run its channel and gave him a large space in Venice to fill with talented creators to film the daily editions. Snap Channel’s flagship show was Literally Can’t Even, written by and starring Sasha Spielberg and Emily Goldwyn (the daughters of Steven Spielberg and John Goldwyn of MGM fame). Emily Goldwyn went to Stanford and graduated the same year as Evan. The scripted series, which consisted of nine 5-minute episodes, featured a comedic version of the duo’s escapades around Los Angeles. Just like all other content on Discover, each episode disappeared twenty-four hours after it went live. Music artists also came to Snapchat’s Venice offices to shoot videos and songs for the Discover channel.

  As the summer rolled into September, advertisers began lining up for the new platform. Snapchat offered to split ad revenue 50/50 with publishers if Snapchat sold the advertisement, and 70/30 in favor of the publisher if the publisher sold the ad on their own. It was a hard bargain, but it was much better than other social media sites like Facebook and Twitter, which shared no advertising revenue with publishers (although they allowed links that drove web traffic). To avoid bombarding users with ads, Snapchat kept advertising spots to a maximum of three per edition, and never within the first three stories in an edition. The company also set the prices and approved every ad, even if publishers sold them. Ads on Snapchat would ideally look as similar to content as possible—full-screen vertical videos with audio that last up to ten seconds.