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In Leaked Memo to Snap Employees, CEO Evan Spiegel Argues Snap's Competitive Advantage Is That It's Not a Social Media Company Also find out why he's dubbed 2018 'the year of the Cheetah.'

By Lydia Belanger

Opinions expressed by Entrepreneur contributors are their own.

Bloomberg | Getty Images

Add Snap, Inc. to the ranks of tech companies that have demonstrated the false wisdom of the infamous Facebook motto, "move fast and break things."

In a leaked 6,500-word memo to employees obtained by Cheddar late last week, Snap co-founder and CEO Evan Spiegel admitted as much through a cheetah analogy. Cheetah, it turns out, was the internal code name for Snapchat's redesign that disappointed many long-time users earlier this year. The name was derived from the speed with which the Snap team developed the redesign, which, looking back, Spiegel called "rushed."

"In the wild, cheetahs can only run so fast for so long (around 30 seconds)," Spiegel wrote in the memo, dated Sept. 26. "Then they stop, rest and take time to reassess their environment. We learned that moving really fast can help move us in the right direction, but we also need to take the time to rest and reassess."

Related: 5 Stats That Show Snap May Be Turning Its Struggling Business Around

Aside from detailing redesign missteps, Spiegel was conspicuously silent about the recent departures of several executives, as Cheddar noted. In the lengthy memo, Spiegel shares what Snap learned from user outrage over Cheetah -- and which long-time values the company is doubling down on as a result. Read some of the highlights below.

Entrepreneur has reached out to Snap for comment and will update this story if it responds.

"Separating social from media'

After a petition and a dismissive, stock-price-tanking tweet from celebrity influencer Kylie Jenner surfaced in February, Snap quickly scaled back some aspects of the so-called Cheetah redesign. In an early iteration, content from publishers and brands presided over friend content on the app's Discover page. Featuring partner content, of course, is a major way in which the seven-year-old company monetizes.

Changes to the Friend feed also distracted from the app's messaging functionality. Now, Spiegel wrote in his memo, Snap is "willing to accept the trade off for the long-term benefits of putting friends first." That said, he is still proud of Snapchat for differentiating itself by "separating social from media," unlike competitors (namely Instagram), and for implementing algorithm-driven personalization in feeds.

In hindsight however, Snap should've done more testing before the redesign rollout, he noted. Snapchat lost 3 million users in the second quarter of 2018. Another issue was Android: Snap initially prioritized iOS in its redesign efforts.

"When we started Snapchat, it was clear that we wouldn't stand a chance as a social media company. That's because the social media space was already dominated by Facebook," Spiegel wrote. "Fortunately, we never wanted to be a social media company."

Various proclamations about what Snap is

Two assertions continue to define Snapchat's modus operandi in the social app landscape. In his letter, Spiegel defined Snap as a "camera company," which is something he's been saying for the past few years. It's why the app opens camera first.

At one point in the memo, he also got a bit poetic with his camera reflections: "Unlike other cameras, light travels both ways through our lens, taking in our environment but also projecting our perspective."

Beyond cameras, a dominant refrain Spiegel shared in his letter is that the company is working to make Snapchat "the fastest way to communicate." Users communicate visually, sending photos and videos with text and sticker overlays, filter and lenses, but there are no likes or comments on Snapchat.

Related: What Tech Companies Such as Snapchat and Their Users Should Remember When Updates Cause Outcry

"If you miss a moment to communicate visually, then you have to explain it with words," Spiegel wrote, "which takes a lot longer." That said, Snapchat also allows users to message one another via text only. For this reason, he wrote, Snapchat is the opposite of frivolous, in that he views it as a time-saver. "Snapchatters create 16 Snaps every day," he wrote.

Speaking of what exactly Snap aims to be, Spiegel claimed that "2018 was the year that Snap evolved from a product into a company." As for what's on the horizon, Spiegel told employees, he wants to "transition from a startup to a sustainable business."

Profitability goals

After successfully boosting year-over-year quarterly revenue earlier this year (despite operating at a net loss), Spiegel wrote that the company has a goal of breaking even in this last quarter of 2018 and achieving full-year profitability in 2019, and eliminating "the pressure of needing to raise additional capital."

Snap went public in March 2017, trading at $17 a share. Today, its share price is $8, one-third of its all-time high $24 per share price.

Expect more changes to the Snapchat interface to drive growth, including another facelift for partner content. Spiegel alluded to plans for Channels to help users find what interests them -- you might envision a layout similar to how Instagram organizes content on its Explore page (versus the "battle for attention" among content on the Snapchat Discover page today, as TechCrunch's Josh Constine put it). Spiegel's memo also touched on plans to expand Snapchat original content ("Shows") and user-generated content through Story curation.

Another goal is to get advertisers to use Snapchat, rather than to experience it indirectly through "presentations or videos" to try to gauge its value. In other words, to "make every client a Snapchatter!" as Spiegel wrote. Additionally, Snap plans to find new ways to measure engagement and return on investment to entice advertisers.

In the U.S. and U.K., Spiegel sees the potential for older users to drive more revenue and "incremental" growth. But he wrote the company has "billions" of users yet to acquire around the world.

Spiegel highlighted differences across the globe and recognized the need to localize content and features accordingly, as well as develop software to support its functionality. He explained his view of the "competitive advantage" Snapchat has in the context of Warren Buffett's concept of "economic moats." Snapchat is insulated from copycats, Spiegel asserted, because of its existing user base.

Yet the prevalence of Facebook-owned Instagram and WhatsApp globally foretells a different story.

Potential differentiators

Two more primary goals Spiegel laid out in his memo, in addition to fast communication and profitability, were "best friends for all Snapchatters" and to "lead the way in augmented reality" (AR).

A focus on "best friends" is in direct contrast to Facebook and Instagram's feeds filled with brands and acquaintances. If people have easy access to communicating with those closest to them on Snapchat, they'll engage more on the platform. It's the opposite of "the more the merrier," if you will.

"Your top friend in a given week contributes 25 percent of Snap send volume," Spiegel wrote. "By the time you get to 18 friends, each incremental friend contributes less than 1 percent of total Snap send volume each."

Then there's AR, or "computing overlaid on the world" as Spiegel described it. He shared that Snap is working on reconstructing "parts of the world in 3D" and further democratizing the ability for any user to create and distribute an AR experience.

But not all of Snap's communication and AR functionality happens on the Snapchat app. The company continues to tout its hardware product Spectacles, and in his memo, Spiegel wrote the company is open to creating additional "separate applications or other ways of delivering our innovation."

Other talking points

The fifth goal Spiegel elaborated on in the memo was to "spread positivity." In a world that's "often divisive and filled with negativity," he outlined the company's plans for future philanthropic efforts and thanked employees for their "hard work and dedication."

He also described how internally, Snap has improved its communication, boosted cost efficiency and implemented a "performance-based compensation" model to reward outcomes, rather than hurried development (a la Cheetah). As a reminder of the company's values going forward, he also announced that, for its anniversary this year, every employee will receive a "2018 Cheetah sweatshirt" as a gift.

"It is a small token of appreciation for the way our team came together through our most challenging and transformational year," Spiegel wrote. "It represents our accomplishments but also the lessons we learned through our failures and mistakes."

Lydia Belanger is a former associate editor at Entrepreneur. Follow her on Twitter: @LydiaBelanger.

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