When Los Angeles-based Snap Inc. began the search to replace Chief Strategy Officer Imran Khan, who left in November to start his own venture capital firm, the 8-year-old social platform/digital camera company was navigating growing pains both self-inflicted and market-driven.
The company was facing an exodus of top-level executives, having lost nearly a dozen since the middle of 2017. Meanwhile, it had struggled to grow its user base to meet Wall Street expectations—while fighting off comparisons to faster-growing social platforms like Facebook, Google and even Twitter. And then CEO Evan Spiegel met Jeremi Gorman.
At the time, Gorman was overseeing advertising sales for Amazon, helping the e-commerce giant grow its ads business from $4 billion to $10 billion between 2017 and 2019, and a 20-year industry veteran, having spent the last six at the world’s largest company. In other words, she knows her way around a sales team.
Spiegel was deep in the interview process when a friend suggested he talk to Gorman, touting her as someone able to scale an advertising business. After their first meeting in Snap’s office in Los Angeles, Gorman sent Spiegel a list of ways Snap should change. (He said Gorman pointed out that Snap shouldn’t try and scale both self-serve and larger brand advertisers at the same time, for example.) Not only did Spiegel hire Gorman in October; he also decided to split the role into two: chief business officer and chief strategy officer.
Snap isn’t the only tech company to reevaluate its upper ranks. Facebook and Google both went through their own struggles before bringing seasoned veterans on board to win the trust of both Wall Street and Madison Avenue. For Facebook, that meant stealing Sheryl Sandberg from Google and Carolyn Everson from Microsoft; for Google’s earlier days, that meant signing Eric Schmidt. Like those companies, Snap’s move signals that it too is growing up.
Snap’s several-point plan
Advertising, we know, is a personal, if not personable, business. As part of the company’s overhaul of its ad sales structure, a new team of executives, led by Gorman, is being deployed to rub elbows with marketers and agencies in ways that, perhaps unsurprisingly, mimic a publisher’s blueprint, shifting a sales-strategy focus away from regional to a set of nine different verticals based on industry.
The verticals—which include entertainment, tech, auto, retail, restaurants, travel/industry/energy and consumer packaged goods—will help the company dig deeper into the pockets of larger brands.
Gorman said the company is also making other changes to its ads business, such as dedicating a team to focus on the six largest ad agencies, another to focus on emerging brands and a third intent on teaching advertisers about Snap’s self-serve programmatic buying.
“There will always be advertisers that need DR experts; there always be advertisers that need brand experts,” she said. “There will never be a time when somebody wishes their salesperson knew less about their brand or less about their industry.”
Over the past year, Snap’s ads business has shifted to focus increasingly on performance-based metrics rather than reach. But in an effort to scale the company’s self-service ads business—another move straight out of the social-platform playbook—Spiegel said the focus ended up leaving larger brand advertisers to languish. It’s an issue Gorman pointed out during the interview process, he noted.
“We are so grateful to benefit from Jeremi’s brilliance, experience and positivity,” he said. “Jeremi hit the ground running and took decisive action that brought our team together and inspired everyone to grow our business.”
Gorman joined Spiegel on the company’s fourth-quarter earning’s call to talk about the ads business over the past three months and where things are heading in 2019. The move was similar to what others have done, such as when Twitter introduced former chief operating officer Adam Bain, or Facebook brought on Caroline Everson, or Google brought on Tim Armstrong. Snap is betting that Gorman will follow in her peers’ footsteps, helping a struggling ads business turn around. However, there’s still a question as to whether Gorman can direct change from the inside.
One analyst put it this way: “How can there be an adult in the room if nobody can tell Spiegel what to do?”
Others seem to think Gorman’s already making an impact. Just this week, a longtime Snapchat skeptic at BTIG upgraded Snap’s stock to “buy,” prompting shares to rise 10 percent. The gain is thanks in part to a better discovery section, better user stickiness—and better management.
“With a significant number of senior executive hires over the past few months and a clearer strategic road map, we can feel the improved morale and momentum internally,” wrote BTIG media and tech analyst Richard Greenfield. “We also have heard repeatedly positive industry feedback on Jeremi Gorman, Snapchat’s chief business officer, with brands/advertisers viewing it as a meaningful step up in management quality. Still a lot of work for Snapchat to do, but we are encouraged by the direction.”
Change the culture, or decide an identity?
Gorman has been hiring a number of employees from Amazon and other companies focused on direct response advertising. In January, she hired Dominc Rioux, vp of emerging sales, who previously worked as head of Amazon’s emerging accounts division in North America. Last month, Todd Miller, senior director of scaled services, joined Snap from Salesforce, where he developed partnerships and go-to-market strategies.
“I think she first and foremost hired and developed amazing talent,” said Kyle McWhirter, who worked with Gorman at Amazon on the P&G account before leaving to become president of an Amazon-focused agency owned by MediaLink. “She was incredibly adept at adapting to change. The industry changes so fast, and what our customers looked for and wanted from us changed so fast.”
Despite the new sales vision, though, Gorman still needs to prove to current and potential advertisers that it’s worth spending with the platform. Additionally, Snap still hasn’t hired its top sales role. Some advertisers say Snap has the right scale, but that it’s still unclear how it really pays off compared to competitors like Facebook, Google and even Amazon—which have all already built out a system for measuring performance.
Andrew Lipsman, an analyst with eMarketer, said Snap’s video-based advertising is a good business but that dollars still flow to companies that can show proof.
“It’s part of the transition to growing up,” he said. “They’re an adolescent now maybe trying to make it into adulthood.”
And like any metamorphosis, there will be identity issues. Forrester analyst Jessica Lieu said Snap’s multiple pivots from messaging app to broadcast service to media platform to camera company have left both users and advertisers confused. She said advertisers appreciate the demographics that are on the platform, but the dual focus on both young adults and older users “feels a little Jekyll and Hyde.”
“It seems like they have made a lot of decisions without having a North Star—the North Star obviously being a pretty nebulous term,” she said. “What is the company’s vision, and how do they see themselves as fitting into people’s lives?”
Barry Cupples, CEO of Talon, who spent tens of millions of dollars on Snapchat advertising while CEO of global media buying for Omnicom, said he was a “very big fan” at first.
“I don’t think they have the bench strength in strategy and the platform in itself to be a major player,” he said. “It’s a bit too narrow, and a bit too one-directional.”
How a CBO looks at products
One area where Snap stands out is with its sponsored augmented reality lenses—a product that is still far more advanced than anything Facebook or other competitors have been able to release. The product has attracted advertisers ranging from Nike and McDonald’s to film studios and makeup brands. Costs vary from a few hundred for a self-made AR lens using Snap’s developer tools, while a national ad buy with a complex AR feature can cost as much as $500,000.
“To me, that’s why I came here,” she said. “I’ve been in this industry for 20 years and I feel like this augmented reality is one of the most unique assets I’ve ever seen. And the ability for brands to participate in conversations at scale is just an incredible situation for advertisers.”
Indeed, Snap has repeatedly been an innovator when it comes to advertising and media. It was the first to push vertical video—an idea that was then copied and scaled by Facebook with Instagram Stories. It was also among the first to help mainstream users adopt AR.
According to a recent report by MediaRadar, Snap had more than 1,400 advertisers already on the platform, with most growth concentrated between the third and fourth quarters. (Snap said those numbers are lower than the actual total.)
MediaRadar CEO Todd Krizelman said the evolution of Snap’s business looks similar to that of Twitter, which had a lot of turnover and slow user growth before finding its footing more than year ago. And, like Twitter did with live video, creating dozens of discover channels has allowed Snap to continue creating contextualized ad space. It’s also extended its video ad length, which Krizelman said has been appealing to marketers.
“To us, that suggested Snap was maturing,” Krizelman said. “They were listening to advertisers that said it’s easier to tell a compelling story in six seconds and perhaps harder in two seconds.”
Major brands not already on the platform say they plan to spend more on Snapchat this year. For example, Hershey’s, which until four years ago spent 97 percent on TV ad buys, is looking to Snapchat to reach younger users. It also sees Snapchat as a way to integrate direct-to-consumer marketing strategies.
“Right now, it’s the audience focus, but there are a lot of nuances that we’re trying to implement,” said Vincent Rinaldi, head of addressable media and technology at The Hershey Company. “Almost as much as we’re this huge iconic brand, we’re trying to take the approach of the D2C companies take to media buying.”
From Amazon to Snap
Gorman’s integrating more of Amazon’s DNA into Snapchat could provide new opportunities for e-commerce as well. For example, Snap is is already integrating its visual search capabilities with Amazon to let users take a photo of an item, which then brings them to Amazon’s website.
Lampertius said Snap could position itself as the virtual “storefront” for e-commerce, which he said Amazon has so far failed to make appealing because it’s more task-oriented. That could help Snap siphon some of those shopper marketing dollars that have helped balloon Amazon’s own advertising business.
While it’s still unclear what Snap might plan to roll out later this year, there might be a glimpse when the company holds its Snap Partner Summit on April 4 in Los Angeles. The inaugural event—which comes a few weeks before the Interactive Advertising Bureau’s own Digital Content Newfronts series—will include announcements related to content and advertising for the year and could be a chance for the company to tout its new team.
“I’ve seen all different numbers of what happened last year and what happened this year,” Lampertius said. “But if Snap is going to get one individual in digital advertising to figure out how to drive revenue, she’s one of the few people out there who can probably get them where they need to get to.”