As Snap struggles to reverse slowing growth and improve its advertising business, parts of the company are operating with a "code red" mentality and more aggressively working to entice older users to join Snapchat.
In the weeks since Snap enacted sweeping layoffs and shut down projects, it's been reorganizing around three areas of focus: the direct-response ad business, user growth, and augmented reality.
Inside the company, employees are hearing little beyond "monetization," or how to make more money off of Snapchat users, and how they need to increase revenue growth by the end of the year, according to people familiar with Snap's efforts and internal messages seen by Insider. The people asked not to be identified sharing information on private projects.
Advertising specifically is operating in a "code red" mode, one of the people said, with workers and ad engineers on related projects pulling long hours to bring more effective direct ads to Snapchat. Direct response is a type of ad that prompts a user to do something, like click a link, which gives advertisers a better idea of how well their marketing is working.
A spokesman for Snap said certain initiatives have been dubbed "code red," like those focused on direct response ads. However, he stressed that this approach is not being applied across all monetization efforts at the company.
Snap wants Snapchat to 'Age Up'
Still, workers are feeling pressure to deliver more revenue growth by the end of the year. As part of Snap's push for cash flow and profitability, it has revived an initiative and given it a new name: Age Up. This is a broad attempt involving many areas of the company, including engineering, to entice more older users to join Snapchat, the people familiar said. In a memo CEO Evan Spiegel sent to workers earlier this month, as reported by The Verge, he said he wanted more people between the ages of 30 and 40 on the app.
The Snap spokesman said there has been a long-running effort to get more users beyond Snapchat's core demographic of teenagers and people in their early twenties. Spiegel spoke years ago about adding older users, but internally there's been little to no talk of such an effort for some time, the people familiar said. Now, adding older users is again becoming a focus.
"Snapchat has grown daily active users each of the past fourteen quarters, and has had an age-up initiative for years," the spokesman said. "Our recently reported revenue growth exceeded many of our peers, and we have shared publicly that we are working hard to improve the technical performance of our ad platform."
For the second quarter, Snap posted revenue growth of 13%. In the first quarter, revenue grew by 38% and, in the quarter before that, it grew 42%, according to company reports. Growth of daily active users has remained relatively flat for the last two quarters at 18%. During the fourth quarter of 2021, the company boasted user growth of 20% or more "for five consecutive quarters." So far this year, Snap's stock is down 77%.
Older users are often more valuable
Leadership for the monetization and new user push now falls largely to Jerry Hunter, who was promoted to the new role of chief operating officer as part of Snap's reorganization. Formerly Snap's head of engineering and before that a leader at Amazon, Hunter continues to run engineering, along with sales, partnerships, and revenue.
The thinking behind Age Up is that older users are easier or more likely to monetize than younger users, one of the people familiar said. Older users are more likely to click on or engage with ads than younger users and they have more money to spend on products and experiences that are typically being advertised, studies have shown.
Almost 60% of Snapchat users are between the ages of 13 and 24, according to an analysis by DataReportal based on information Snap shares with advertisers. About 22% are over age 24 and just 16% are over 35 years old. As of the second quarter, Snap's global average revenue per user was down 4% for the year to $3.20, according to company disclosures.
Age Up is just one of the internal projects Snap has started to reenergize use of, and revenue from, the Snapchat platform. As Insider previously reported, Project Sunshine is another effort at the company aimed at boosting views and engagement of its core Story product. The rate of engagement and posting of Stories has dropped in the face of changing user habits and the increasing popularity of TikTok, people familiar with the project previously told Insider.
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