Snap founder and CEO Evan Spiegel said Tuesday that it’s been really “interesting to watch the U.S. government grapple with the success of a consumer tech company that is headquartered in China,” referring to social media powerhouse TikTok, owned by Chinese giant ByteDance.
“It’s a free market question,” Spiegel said on a conference call to discuss Snap’s second-quarter earnings, responding to a query about how government threats to bar Tiktok could impact the industry. U.S. Secretary of State Mike Pompeo has said publicly the government is looking into the possibility of banning TikTok in the U.S. and has compared it to Chinese companies like Huawei and ZTE, which are considered threats to national security. A difference is that those businesses aren’t consumer-facing, while the popular Tiktok shortform video app is.
ByteDance has denied that the Chinese government influences its business and recently hired former Walt Disney executive Kevin Mayer as COO, and as CEO of TikTok. It is reportedly considering changes in TikTok’s corporate structure, including moving its headquarters out of China, to defuse the issue.
The platform, Spiegel said, leveraged success in China, the second-largest economy in the world, to enter the U.S. market, which is smaller in terms of population. “It has been fascinating to see the U.S. government grapple with this… I think the consumer has shifted a little bit with the success of consumer tech from China,” he said. “People assumed the next consumer tech hit would be a startup [but] it seems … it is a Chinese company that offers many services around the world. We are definitely interested in seeing how this all develops.”
Snap’s chief business officer Jeremi Gorman, whom the company poached from Amazon last year, was asked about another hot tech topic, the Facebook boycott. She said it’s hard to tell what impact it’s had on Snap so far. Dozens of advertisers from Adidas to Ben & Jerry’s have bailed on Facebook recently in protest over its policies on content moderation. Disney is said to have slashed its advertising on Facebook and Instagram.
Gorman noted that some of the exits could be related to overall content marketing budgets given the challenging economic environment. And she noted that Snap’s burgeoning direct response advertising is not a segment involved in the boycott. But, that said, “What we do know is that it’s always positive to engage at the highest levels of an organization and this conversation has opened the door for us to do that extremely frequently at the CEO and CMO level.”
Snap was designed “in a brand-safe, curated way since the beginning. There is no town hall or ability for an unvetted user to post [and] as advertisers evaluate platforms that are aligned with their values, these deliberate decisions made years ago are of paramount importance,” she said.
Gorman said political ads are “a segment we are actively going after.” Snap serves 90% of 13- to 24-year-olds in the U.S. and 75% of 13- to 34-year-olds, “So educating them, allowing them to learn more about the issues in a factual based manner is super critical.”
To ensure transparency, she said all Snapchat political issue and advocacy ads are publicly available with relevant information on impressions, spend and paying entities in a specialized ad library. “We have very specific guidelines for political advertising that apply to ads related to elections and advocacy issues. But most broadly, we do believe that Snapchat can play an important role with getting first time voters engaged with our democracy and we look forward to providing a responsible path for our community to engage with their elected officials, candidates and campaigns.”
Snapchat reported second-quarter earnings earlier Tuesday, a mixed bag that made investors antsy, particularly about a 17% boost in active daily users from the year before, to 238 million, was still about 1 million shy of what the company had predicted three months ago. Execs described a strong growth spurt in users at the beginning of the quarter that tapered off unexpectedly as the lockdown continued but noted that the number still rose sequentially from April to May, and from May to June. They said the current quarter starting in July looks solid but forecast growth of 15%-16% — below the Q2 rate.
The third quarter is typically the slowest, they said, noting that some key drivers of advertising like back to school, movie releases and sports remain unpredictable.