The Snap Inc. IPO

Snap! Acquired is live on the scene reporting from the "Super Bowl" of 2017 tech events: Snap Inc's hugely anticipated (and just plain huge) IPO. What does the future hold for this plucky “camera company”? Will Snap's IPO endure as tech's most important picture-frame since the 2012 debut of Facebook http://www.acquired.fm/episodes/2016/11/11/episode-25-the-facebook-ipo, or is it destined to fade as just another snapshot? We debate! Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Topics covered include: Reference to our previous Acquired episode on Snap http://www.acquired.fm/episodes/2016/5/22/episode-12-snapchat- covering Facebook’s failed attempt to acquire the company in 2013, which goes deep on Snap’s origins and early historySnap’s busy years since: launching Discover https://techcrunch.com/2015/01/27/snapchat-launches-discover/, Lenses http://mashable.com/2016/11/08/snapchat-world-lenses/#t4YQeiohD5qS, Geofilters https://techcrunch.com/2016/02/22/snapchat-introduces-on-demand-geofilters-for-parties-and-events/, new Chat http://www.theverge.com/2016/12/13/13935568/snapchat-new-group-chat-feature, Memories http://www.theverge.com/2016/7/6/12102294/snapchat-memories-private-snap-archive, an ads API http://adage.com/article/digital/inside-snapchat-s-ad-delivery-system/306172/, acquiring Bitmoji http://fortune.com/2016/03/24/exclusive-snapchat-buys-bitmoji-maker/, and, of course, debuting Spectacles https://theringer.com/snapchat-spectacles-best-2016-tech-release-fb4397eb5f38#.whoulhanmThe incredible document that is Snap's S-1 filing https://www.sec.gov/Archives/edgar/data/1564408/000119312517056992/d270216ds1a.htm (read starting from the “BUSINESS” section on p.93 https://www.sec.gov/Archives/edgar/data/1564408/000119312517056992/d270216ds1a.htm#rom270216_11)Snap Inc’s “unique” voting structureEvan Spiegel’s “CEO Award” bonus for successfully completing an IPO: an extra 3.0% of the company worth more than $600MSnap’s IPO pricing, first day of trading “pop”, and momentum carried into day two Introducing a new show section (for IPOs): Narratives! Snap is a “camera company" https://qz.com/922490/snaps-ipo-is-about-to-drop-but-how-exactly-is-it-a-camera-company/Snap's opportunity is winning television ad dollars http://www.thewrap.com/snapchat-ipo-the-pitch-is-a-replacement-for-tv-ad-dollars/Snap is a cult of the “product genius https://www.theguardian.com/technology/2017/feb/25/snapchat-ipo-evan-spiegel-investors”Snap has a growth problem… and its name is Instagram (Stories http://blog.instagram.com/post/148348940287/160802-stories)Snap has a cost problem: the (first?) gross margin negative https://medium.com/daphni-chronicles/you-need-to-lose-money-but-a-negative-gross-margin-is-a-really-bad-idea-82ad12cd6d96#.k9tz127c3 IPOWall Street to Evan: “we trust you… for now http://www.marketwatch.com/story/investing-in-snap-ipo-is-an-impotent-bet-on-unproven-executives-2017-02-23"Chris Sacca’s biggest email fail of 2012 https://twitter.com/sacca/status/837400028352151552…And of course all the classics from the Acquired canon: waves, moats, flywheels, network effects, starting small and more! The Carve Out: Ben: The Bill Simmons Podcast https://itunes.apple.com/us/podcast/the-bill-simmons-podcast/id1043699613?mt=2 with Ben Thompson https://soundcloud.com/the-bill-simmons-podcast/ep-179-the-battle-for-tech-supremacy-with-ben-thompsonDavid: The Art of War https://www.amazon.com/Art-War-Sun-Tzu-ebook/dp/B009XH5V6Y, also Evan Spiegel’s Carve Out for 2013 http://www.businessinsider.com/spiegel-gave-employees-the-art-of-war-2014-1? IR=T :)

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  People misuse the crap out of literally. And they're like, oh, he, he literally had him eating out of his hand. It's like, no, he didn't. He figuratively had him eating out of his hand. But last year, the whatever, Merian Webster added an additional definition to literally to mean figuratively. So now it literally means the sum total of everything that it means and everything that it doesn't mean.

• 0:30Speaker 00

  Welcome to episode 32 of Acquired, the podcast where we talk about technology acquisitions and IPOs. I'm Ben Gilbert.

• 0:38David Rosenthal?

  I'm David Rosenthal.

• 0:40Speaker 00

  And we are your hosts. Today's episode is the Super Bowl for our world, the Snapchat IPO. It's been long awaited, highly speculated, and everybody's got an opinion. And they are not all the same. So we are recording right now on Friday, March 3rd, exactly 21 hours after trading originally started. Trading is underway for, for day two. And hopefully we should be able to get this out to you guys by probably tomorrow over the weekend and, and get some pseudo real time discussion going here on Snapchat. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta.

• 1:23Speaker 00

  AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 1:36David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote unquote "shadow AI" running with no security review at all.

• 1:57Speaker 00

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 2:19David Rosenthal?

  In half? Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor and Snowflake all stay audit ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 2:37Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance and the work to earn and prove trust. We're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V A N T A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you.

• 3:05Speaker 00

  All right, listeners. So as you know, we also like to try new things on the show. And we have a little bit of a format switch today, which we'll tell you about. One thing that I wanted to try is, is reading some of our iTunes review here on, on Acquired. So when you guys leave one that we think is particularly worth reading on the air or funny or, I don't know, extra complimentary or something, we're going to read them. Kind of like the Bill Simmons mailbag, but for, for iTunes reviews. So here's one. "They aren't scalpers that want to create fake problems or to short a stock." Well, thanks, Spencer Camp. We appreciate it. And here's another. "It's as if you are reliving the story with them as an insider." From Peach 1987. That's, uh, thank you. We appreciate

• 3:49Speaker 00

  that. "Ben has been a real trooper here. He was post-surgery and now he's back. Great show." MG, MG, MG, MG 3141. Well, to whoever knows me personally and knows that I had, I had knee surgery last year. Uh, thank you. Um, MG, MG. We really appreciate that.

• 4:09David Rosenthal?

  Ben has indeed been a trooper.

• 4:12Speaker 00

  Yeah. Thank you, David. But, uh, all good now. And, uh, you know, excited to, yeah. Excited to talk Snap. So, um, if you like the show and, and want us to read your comment on the air, leave a review on iTunes. And, uh, we've also got a Slack. I just looked. We are 475 strong of, of people hanging out, talking M and A, IPOs, tech in general.

• 4:35David Rosenthal?

  So much great discussion on the Snap IPO. Shout out to everyone in Slack.

• 4:40Speaker 00

  Yep. Yep. And honestly, there's a lot of good content on this show that came from the discussion yesterday. So, uh, so join us. It's fun. So without any further ado, Snapchat.

• 4:52David Rosenthal?

  Yeah.

• 4:53Speaker 00

  David, we were talking about this before the show, but we should really only spend a couple minutes, I think, on the history of the company.

• 4:59David Rosenthal?

  Yeah.

• 5:00Speaker 00

  Listeners, if you listen to episode 12, a lot of you, I think, have joined us since then, but we talked about this what-if acquisition where Facebook made a $3 billion.

• 5:11David Rosenthal?

  Famously.

• 5:12Speaker 00

  Yes.

• 5:12David Rosenthal?

  Yeah, made a $3 billion offer to buy Snapchat back in, shoot, it was the end of 2013, right?

• 5:21David Rosenthal?

  Time runs so fast. Anyway, it was episode 12 for the, as Ben mentioned, we're not going to cover the, sort of, all the story and drama around the founding of Snap, which was then Snapchat in the early years here, but go listen to that episode. I listened to it again yesterday to get prepped. And if I do say so myself, I actually think it's held up really well, even though the show has evolved a lot since then. It's a good episode. We recommend it.

• 5:51Speaker 00

  Yeah, that was the episode. It's funny when you do these things that when you do something new for an episode, it sort of raises the bar and you can never go back down. And that was one of the episodes where David and I did much more research than we had previously done before and kind of set a little bit of a new standard for ourselves. So, you know, I like that episode. I'm cursing it a little bit, but you know, I also feel like it holds up. So that's sort of the, that's part one of the Snapchat story. This is part two and we will in all likelihood have a part three.

• 6:22David Rosenthal?

  I think, I think the only thing that we know for sure going forward is there will be more parts to this story. It is not over.

• 6:31Speaker 00

  Yes.

• 6:31David Rosenthal?

  So with that, we pick up our story for Snapchat in, last we left them, it was fall of 2014 and Evan and Bobby, the plucky co-founders, had fended off the previous year $3 billion acquisition offer from Facebook. They'd launched Snapchat Stories. They'd hit 50 million daily active users. They'd just settled the famous lawsuit with their ousted co-founder Reggie Brown that we talked about a lot on the last episode. Interesting that that has like been a total non-narrative in the IPO. I think I'd saw like one news story about him, but.

• 7:11Speaker 00

  Hey, it's settled. What's there to talk about?

• 7:14David Rosenthal?

  So things are going pretty well for the Snapchat founders and the company. Fast forward through the next two years, you know, it kind of would have been easy for them to say, hey, like, we're gonna ride this gravy chain, but they have been pretty hard at work since then. They're not resting on their laurels. So since fall of 2014, in rough order, here's kind of what's happened with Snapchat. They've launched Discover, which then became Publisher Stories. They launched Lenses. They launched Geo filters. They launched a whole ton of new chat features, which are actually pretty cool.

• 7:57David Rosenthal?

  And I probably use that more than anything else on Snapchat these days. They launched Memories, being able to save snaps. They acquired Bitmoji. They integrated that into Snap. And they launched Spectacles, which we've talked about in hot takes in the past.

• 8:12Speaker 00

  Yeah, on top of it all, they're now a hardware company.

• 8:15David Rosenthal?

  Yeah, on top of it all, they're a hardware company now. On the business side, they've also been hard at work. Revenue has grown almost 10x over the past year. But they also, this past October, October 2016, they launched their ad API, which was a huge milestone that advertisers can now buy ads through partners and through agencies and buy at scale without ever talking to Snap. So huge, huge achievement for them. So, you know, I mean, you could sort of say that the freight train has been rolling down there in Venice Beach in Southern California.

• 8:53Speaker 00

  Yeah, that revenue stat's interesting because in late 2014, that's when they made their first dollar of revenue. So it's really only been, you know, just over two years. And now they're doing $400 million a year in revenue. And obviously, all these multiples that we're going to talk about are just, you know, absolutely bananas for any sort of comparable stock, public market, stories that you would tell about it. But in two years to go from not monetizing your users at all to doing about $400 million in revenue is quite the acceleration.

• 9:31David Rosenthal?

  Yeah, very impressive.

• 9:34David Rosenthal?

  But along the way, there is one thing that happens to foreshadow later in the episode here that we're going to talk much more about later. In the last six months, their user growth has slowed. And some say, many say, that that's a result of something else that happened in August 2016. And that's Instagram launched Instagram Stories. So much more to come on that front later in the show. But an important, very important moment in the last, last year of Snapchat's life. But undaunted, they proceeded with their much rumored IPO filing.

• 10:18David Rosenthal?

  Almost exactly a month ago, February 2nd, they publicly filed their S1. And it's pretty clear when you read this document, kind of right off the bat, that this is not your ordinary, dry, you know, SEC S1 filing. Others have talked about this, including Ben Thompson. But if you haven't gone and read it, like, we seriously recommend it. This is an incredible document. Whatever happens with Snapchat in the future, you know, go read at least the our business section, which starts on page 93, and we'll, we'll link to this in the show notes. And we're going to spend a lot of time talking about this document.

• 10:56Speaker 00

  It's incredibly compelling, concise, clear writing, and you, the personality of the company just bleeds through.

• 11:04David Rosenthal?

  And I mean, I would, I would say, I think this is almost, I think this might be a watershed moment in thinking about something we've talked a lot about on this show, but like, what is the, the tool of going public? Like, you get to write this document and you get to speak directly to this huge audience base, that especially for a company like Snapchat, you know, is not currently your core user base. And it's a tool that clearly the company thought about it this way and is using it as such.

• 11:35Speaker 00

  Yeah, and so one like one for listeners who haven't read the S1 because why would you go read S1s? But David and I did. And there's, there's a point where they talk about how part of Snapchat's culture and ethos is that they're kind. And this is a quote, "When we say kind, we mean the kind of kindness, sorry, when we say kind, we mean the type of kindness that compels you to let someone know that they have something stuck in their teeth, even though it's a little awkward."

• 12:02David Rosenthal?

  Like, could you imagine reading that in an S1? Like, you know, and even Ben, you know, you said, why would, you know, why would you go read an S1? Like, I really think this is, this is a document worth reading.

• 12:14Speaker 00

  Yeah.

• 12:15David Rosenthal?

  For many, many reasons.

• 12:16Speaker 00

  Also, the roadshow video, it's like an incredibly well-produced way that Snap really told their story. And I'm not, I'm not totally sure if it's still available, because I think they pull those things down after the, after the IPO. But there's, there's lots of little clips of it floating around. And it's, it's not just your standard, you know, person standing in a conference room next to a PowerPoint narrating it for a bunch of investment bankers. It's really like a consumer-grade compelling story.

• 12:46David Rosenthal?

  It's almost like something that came out of Hollywood, because it did. So we'll, we'll get to the actual IPO pricing two days ago in a minute. But sticking on the S1, you know, the most surprising thing, I think, is, is just the nature of this document. But, but there are two other surprises in the document that I think a lot of the investor community wasn't necessarily expecting. And the first one is that there's a, there's a unique voting structure for the common shares that are being offered in this IPO.

• 13:26David Rosenthal?

  And what's unique about it is you don't have a vote. So this has literally never happened before. Companies have gone public with dual class, or even three classes of share structures that allowed management and founders to retain, you know, effective voting control of the company. But

• 13:45Speaker 00

  And David, those examples are, there's, there's Facebook and Google didn't go public this way, but have modified to sort of have this dual class structure?

• 13:54David Rosenthal?

  I think they, I think they did both go public with those dual-class share structures.

• 13:58Speaker 00

  Okay. And it's something they learned from the New York Times?

• 14:02David Rosenthal?

  Yeah, so historically, a bunch of media companies have had this. News Corp has had it, The New York Times, and a bunch of others. It was, for whatever reason, it was in vogue with publishers and media companies, you know, at some point in the 20th century. And tech companies have really sort of taken this tool and run with it. But this is like, this is breaking new ground here. So, you know, the thing about those other IPOs, Facebook, Google, even the media companies, like, usually there's a 10 to 1 voting structure where each share of the founder's stock has, or the CEO's stock, has 10 votes to every one of the public stock. And, and, and there's a market for those stocks.

• 14:47David Rosenthal?

  So if the founders and CEOs sell the stock, then, you know, you can buy that with, with separate voting shares. And that's important because, you know, not for individuals voting necessarily, but like activist hedge funds, activist hedge funds have made use of this to amass a voting block in a, in a, in a stock and then use that to agitate to try and get a representative elected to the board of directors. It's been a tool they've used. So Snap says-

• 15:14Speaker 00

  And, and for other reasons too, to, to, like, the Carl Icahn has done this with, with Apple and I think with eBay to, to advocate for a buyback or a distribution.

• 15:28David Rosenthal?

  More dividends or all sorts of things. And there's a view, probably not unjustified, that that's really an annoying thing that you want to avoid.

• 15:39David Rosenthal?

  But, you know, this is an extreme case of, no, you get no votes. Not now, not ever.

• 15:47Speaker 00

  What a baller move to, to say like, hey, you know, we're going to sell, what is it, like 19% of this company? You know, and we think at this price point that even with no ability to have any influence, even if all of you get together on the future of this company, it's still going to be oversubscribed.

• 16:05David Rosenthal?

  Yeah. And what's crazy is it's not even just, there are actually three classes of Snapchat shares. There's what they're selling to the public, you get no votes. There's shares that existing investors, VCs have in the company, they get one vote. And then there's shares that Evan and Bobby have, and they get 10 votes. And if Evan and Bobby ever sell their shares, then they automatically convert to the other investor shares. So there is one vote, but essentially it's set up such that, you know, if something were to happen to one of them, and they've actually filed proxies with each other. And this is in the S1. If something happens to one of them, the other gets essentially full voting control in perpetuity of the company.

• 16:51Speaker 00

  Wow.

• 16:52David Rosenthal?

  Crazy. So that's one. And then, and then the other surprise in there, and this actually, I'm really surprised that this has not gotten a lot of press. There's this thing, I don't know if you saw this Ben, this little thing called the quote CEO award in the S1.

• 17:09Speaker 00

  No, this is new to me.

• 17:10David Rosenthal?

  What this is, I have never seen this before. So Evan, Evan Spiegel, the CEO of Snapchat, upon completion of the CEO of the IPO on Wednesday, he got essentially a bonus of an additional 3% of the company after, after the IPO. So he already had a 24% equity share in the company.

• 17:36David Rosenthal?

  And, and the company essentially gifted him as a bonus for completing the IPO, another 3%, even after, after the dilution of the IPO. And so at the $17 IPO price, which we'll talk about in a sec, that's worth $625 million that the company gave to Evan for successfully completing the IPO. Well, this is, I've never seen this before.

• 18:02Speaker 00

  That's a weird incentive. Like, I mean, it'd be interesting to see like when, I guess, once you already committed to going public, it sort of makes sense to incentivize.

• 18:13David Rosenthal?

  Well, what's really odd here is, you know, I mean, Why would his incentives not be aligned? I mean, he owns 24% of the company, which at the IPO was worth almost $4 billion.

• 18:26David Rosenthal?

  But somehow, I would, I'm sure it will never come out, but I would love to know how those negotiations went down.

• 18:34Speaker 00

  Well, it's him negotiating with the board or with the syndicate of investors taking it public?

• 18:39David Rosenthal?

  Well, it must have been everybody, but it has not gotten a lot of press and I'm quite surprised about it. I mean, I could imagine a situation if you have an external CEO come into a company and you can incentivize that person by, you know, a bonus if they successfully complete an IPO. But this is where Evan's literally the founder and along with Bobby, the largest shareholder in the company. Very, very interesting.

• 19:05Speaker 00

  Yeah.

• 19:07David Rosenthal?

  So despite that, on Wednesday, March 1st, two days ago as we're recording this, Snapchat prices its IPO. They priced it at $17 a share, which is above the range that they'd indicated of $15 to $16, which is, there's a whole theatrics to this. You always want to price above the range.

• 19:26Speaker 00

  But a good bit below what the sort of murmur on the street was for months before, right? People were thinking more in that, that $20 range.

• 19:34David Rosenthal?

  Yep. And, and not that much higher. I don't remember exactly what it was, but not that much higher than the share price that they sold equity in their last private round at. But, but regardless, that gives them a $24 billion market cap at pricing. And then yesterday on Thursday.

• 19:56Speaker 00

  Which, yeah, you're right. That, that is an up round from their previous financing, despite talks of that, that $14 to $16 per share range would have been a down round. And that would have been, that would have been kind of crazy because then.

• 20:07David Rosenthal?

  That would have been bad.

• 20:08Speaker 00

  Yeah, yeah, a whole bunch of, you know, recently issued stock options that are actually currently worth less than their their stock price. So that if that had been the case, then there would have been a lot of finger crossing that the the stock did pop and that by the time employees could sell at their their lock that when the lockup time ended, that they could actually be above the initial strike price of of their option grant. But none of that's an issue. It actually did price above their last round.

• 20:34David Rosenthal?

  It did price above. And like we said, at a $24 billion market cap pricing opens trading yesterday, and the market likes it. And so 44% pop on the first day of trading, closed the first day at $24.48. Almost over 200 million shares were traded, which is a lot. And and the value, the market cap, the valuation of the company at the end of the day, $34 billion. And then this morning, Friday morning, the market continues to like

• 21:13David Rosenthal?

  it. It's up another almost 20% trading in the kind of $29 range. So so far, a successful IPO. We have not had any Facebook like disasters.

• 21:25Speaker 00

  No. And they did take longer to to start trading yesterday, but that was by no means because of a, you know, technical hiccup like like with Facebook. But, you know, because actually, the despite the fact that the IPO price was $17, started trading immediately at at $24. So, you know, the the trade offs there, when you look at who won and who lost, Snap left a good amount of money on the table, about a billion dollars on the table by not by not initially setting it in that $23, $24 range. Snap syndicate of investors that are bankers that took them public, didn't get their their cut of that that billion dollars.

• 22:08Speaker 00

  But everyone that bought the IPO at 17 got to take advantage of that that short term bump. And and realistically, when we'll we'll talk about this as we grade the the IPO. But this this all really accrues as as value to Snap, because in getting this positive momentum, it's great for hiring, it's great for customers, it's great for the story around the company that they they went out and

• 22:31David Rosenthal?

  Huge. And that this, you know, by all indications thus far has been a quite successful IPO is going to be great for the company. But that said, you know, we're talking, this is a lot of mechanics here.

• 22:44Speaker 00

  Mechanics and one day in.

• 22:46David Rosenthal?

  And one day in. And even though we're lauding the S1, it is still pretty, a lot of it is pretty dry stuff. You know, what we want to spend the bulk of this episode talking about, and the really interesting thing to think about is like, okay, you know, what, what happens next? There's all this buzz out there right now. People have all sorts of different opinions about, you know, Snap is doomed, Instagram is going to kill them, or Evan Spiegel is a once in a generation, you know, product genius. Where does the truth lie? And so that's what Ben and I have been thinking about over this past week. And we thought, we thought we're going to, the best way to do this is we're going

• 23:29David Rosenthal?

  to introduce a new section to the show that we might use for IPOs going forward. And we're going to call this narratives. And, and our idea is that there are really two narratives that are being told throughout an IPO. There's the, an IPO process, there's the narrative that the company wants to tell through their S1, through their roadshow. And, and all of the, the statements that they get to make, both written and otherwise. And then there's the narrative that pops up around it in the media, in the investor community, in the tech community, everybody reacting to what's

• 24:11David Rosenthal?

  happening. And so we thought, we distilled what we think are kind of the, the three most important points of both the narrative that Snap has been trying to tell over the past month, and the narrative that the media and the investor press has been telling. And we're going to talk about each of them and, and sort of judge how much we agree or disagree with them.

• 24:35Speaker 00

  We are.

• 24:36David Rosenthal?

  So, so let's start with Snap. You know, you read the S1, you watch the roadshow video, and what immediately pops out, and this got tons of press, but I think it was just a brilliant way of positioning that the company took. You know, they say, you read it and it says, "We are a camera company." They don't say, "We're a mobile company." They don't say, "We're an app company." They don't say, "We're a social network." Snap is a camera company. What do you think, Ben?

• 25:07Speaker 00

  I mean, the first thing that came to mind, I'm, I'm like, reading a lot of the S1 cynically, so the first thing that comes to mind is, "Oh, I see. They don't want to be comped against Twitter." That, that makes sense. But the interesting thing, as you start to read more and more and more, and this is my, my biggest takeaway from this whole thing, based on the insane, like, let me just give a quick, like, Snap, at their $33 billion market cap, is trading at about 80 times their sales. Facebook IPO'd at like, 28 times their sales. Even Twitter was like, 56. We're just in like, off-the-charts territory for what their market cap is relative to the, the revenue that they're doing. And when you, when you start to peel apart, like,

• 25:52Speaker 00

  "Why are they saying they're a camera company?", the big thing that, that stands out here is that they don't want investors to buy this IPO based on the product right now, the, the social graph right now, the, the, the growth rates in the last six months. Like, they don't want to be priced on any of that. They want you to believe that they've done these incredible, innovative things, transforming what we think of as a camera and what we use cameras for. And they want you to buy on the idea and, and hold on the idea that they're going to continue to do that and reinvent the camera for the future. And that they, you know, in typical Evan Spiegel Snapchat fashion, they're...

• 26:40Speaker 00

  They're unique and they believe that they are indeed a different and new type of company. They're going to do things their own way. And like, who are you to say what kind of company this is? They're a camera company and you don't even know what a modern camera company looks like.

• 26:55David Rosenthal?

  Well, this is what, you know, when I say this is brilliant. It's just, it's such an unexpected and audacious statement to put out there. That it captivates you. And then when you read through the S1 and you watch the roadshow video, it's very compelling how they present it. You know, the sort of, you know, famously at this point, the first, you know, user manual for how to use Snapchat is the S1. And they go through and just really exquisite detail about all the product thinking that has gone into how they've created Snapchat.

• 27:36David Rosenthal?

  But what it does, you know, and this is what I said when I, when I introduced this, what, what it does by positioning it as a camera company is it completely draws attention away from what heretofore and still is the narrative on the media, investor and tech side of the aisle here about Snapchat, which is that they are a social network, which is competing with the social network, which is Facebook and Instagram and WhatsApp.

• 28:06Speaker 00

  Yeah.

• 28:07David Rosenthal?

  The other two things I want to say quickly about this idea and positioning of Snap as a camera company is one, it makes lenses really interesting. So lenses, you know, obviously it evokes a camera.

• 28:24David Rosenthal?

  But lenses are the one sort of piece, product feature that Snapchat has that Instagram doesn't yet. And what's interesting is, you know, you read through the S1 and I was, I was thinking like, okay, well, like how, how many people actually use lenses? And apparently a third of Snapchat users use lenses every day. And that's what, you know, and you read through and all the technology investments and infrastructure investments that Snap is making, a lot of that is going into the technology powering lenses, which starts to make you think about.

• 29:03David Rosenthal?

  The next generation after mobile and augmented reality, and then of course their spectacles, you know, is Snap kind of setting up using the IPO and their S1 to set themselves up as being positioned for the next wave in tech and putting a stake in the ground that they believe that's going to be augmented reality?

• 29:24Speaker 00

  Oh, man. Yeah. And it's super interesting to think about, you know, when they say, you know, Snap is a camera company. Well, like Kodak was a camera company. And then like today, like, is Apple a camera company? Or, you know, Sony and Samsung make the actual, the actual, actual lenses that go in there. So are they the number one camera, quote unquote, camera manufacturer in the world? And, you know, I'd be a little bit more skeptical of Snap saying they're a camera company, except that they have, they actually do the full stack in making the hardware now of spectacles. And realistically, those are probably OEMed in by, by the same folks that make the actual lenses and actual sensors

• 30:08Speaker 00

  that are in smartphones. But as you continue to extrapolate that, so let's look at Apple as a camera company. We, we crossed over from, from like pure optics based cameras into hybrid optics and software based cameras, like several years ago in the smartphone generation, there's, with such tiny little lenses and sensors, and they're, they're so close to each other. There's not a lot of like actual physics that that would produce high quality images. And we have to like, do a lot of really tricky faking and kind of like post-production and software that the user is never exposed to. And that's

• 30:49Speaker 00

  suddenly with, with the iPhone 7 Plus become extremely visible with, with the fact that there's two lenses. There's a, they never expose the fact that you're switching from wide to telephoto. There's just this like, you know, smooth slider into 2X. And the thing that it's really doing there is like, it's always in real time compositing a mashup of the two lenses and doing a lot of really advanced computation on the fly, not just for portrait mode, but always to be taking advantage of both of those lenses. And so...

• 31:19David Rosenthal?

  And I think that's, that's actually a great analogy to what lenses in Snapchat are doing, right? Like, that is augmented reality. And that requires a lot of processing power.

• 31:31David Rosenthal?

  And augmented reality thus far and virtual reality have been these really clunky things that nobody wants that cost a lot of money, that it's unclear what you do with them, you know?

• 31:42David Rosenthal?

  But Snapchat just makes that really easy. It's just all behind the scenes. And as we learned, we'll talk about this in a minute. It's costing them a lot in hosting fees and technology resources to be able to do that.

• 31:55Speaker 00

  Yeah, totally. So to close on that one, I think when they say they're a camera company, the world has moved to a place now where a camera is not just a physical thing. A camera is a full hardware, software services stack. And that starts, when you think about what a quote unquote camera is that way, and the fact that maybe it's a hardware, software services, network stack, that starts to lend a lot more credibility to, oh, I see. Snapchat is really the full stack of the modern camera.

• 32:22Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 32:36David Rosenthal?

  Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 32:50Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI control tower.

• 33:00David Rosenthal?

  Yep. AI control tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 33:17Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 33:34David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 33:50Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 33:59David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you.

• 34:10David Rosenthal?

  Should we go on to number two?

• 34:12Speaker 00

  Yeah, let's do it. So the, the second main point in Snap's narrative that they'd like you to believe is that they are a brand advertising business, which is fundamentally different than the gigantic elephant in the room, major, major ad networks on the internet right now of Facebook and Google. And what they're really saying there is we are attacking TV, not print media. And for anyone who's, who hasn't played around with the Snap ad platform versus Facebook or Google's ad platforms, on Facebook and Google, you can do pretty incredible targeting and you get to really finally get extremely granular on what type of demographics you're, you're reaching. And you also, you know, like when you're, when you're using Google remarketing and things like that, like you can, you can track people around the web and you can do all sorts of

• 34:57Speaker 00

  things. Snapchat is this super like, at least right now, privacy first, we are not going to give you incredible targeting. You, you buy big, broad swaths like you would a television commercial and, and you just reach a bunch of people. So they're fundamentally, you know, driving for scale there, the way that you need scale for, for brand advertising businesses. And the other thing is that you can't really, uh, like click through a Snapchat. There's, there's no way with those Snapchat ads to, you know, land on someone's site and have them optimize conversion rates and all these things.

• 35:31David Rosenthal?

  In the same way that Google and Facebook with their app install platform like are, like that's what they are.

• 35:37Speaker 00

  Totally. It's, it's like-

• 35:38David Rosenthal?

  They are conversion machines.

• 35:40Speaker 00

  Yeah, yeah. It's more like, here's a new Chevy. Think about Chevy a lot.

• 35:44David Rosenthal?

  Yeah. Well, and there's just like, there are a couple really, really important points here. You know, one, Snap is making the argument here that, as Ben said, you know, they are going after TV, after television. They are not going after, you know, in a lot of ways. The internet advertising to this point has been a reinvention of kind of the classified ad, you know, the, the direct response. TV has persisted, but TV is, is, is not measurable in anywhere near the same degree that traditional online advertising is.

• 36:25David Rosenthal?

  And, and it's smaller, like the, the number of people in the U.S. who watch TV is, is large, but relative to the number of people who use Google, who use Facebook, you know, et cetera, like it's much smaller. But what TV has that Facebook, that Google don't is engagement. And the whole Snap's whole narrative around this is we have engagement. Yes, we're smaller than Facebook. Yes, we're smaller than Instagram. Yes, we're even smaller than Twitter. But they make, they make, go to great lengths in the S1, talking about, you know, the average Snapchat user opens the app 18 times a day. This is on average.

• 37:05Speaker 00

  For what, 20 to 25 minutes?

• 37:07David Rosenthal?

  25 to 30 minutes in Snapchat every day. And, and they argue that that is the same level of engagement that television has historically seen.

• 37:19Speaker 00

  Yeah, and we should call out that despite the fact that there's way more time spent in front of a, a, a screen, be it desktop or a phone screen, interacting with apps in the web than, than there is on TV. That sort of happened a while ago where people are spending more, more time on the internet than they are in front of a TV. But until 2017, this is the first year that this is actually going to happen, the ad spend has totally lagged it. So the, the ad spend on television has, has outpaced digital ad spend. And finally, we're going to have this catch up where the, the dollars are five to 10 years behind the switch in, in engagement. So Snap is, is, I think they even say this in their roadshow video and possibly their

• 38:00Speaker 00

  S1, that they, they really have a tailwind here of, you know, the, the, the dollar spend from, from advertisers is that they're looking for a place in a, a digital format because that's where all the ad buying is shifting, because that's where all the attention and engagement is. And they're looking to buy the sorts of incredibly broad Coca-Cola style blanket the entire world with advertising for their brand. And they're looking for a place to deploy those dollars in the produce the effect that they're used to spending. And brand advertising is just, I actually don't know the numbers, but it's significantly larger than this direct response advertising that's dominated the web to date.

• 38:44David Rosenthal?

  Yep. And so then let's jump to the third piece, critical piece we see in Snap's narrative, which is really the, you know, taking one, you know, we are this revolutionary camera company. We are not what you think we are. We're a new vision and we're going after this market that is very different from what other internet companies have gone after before. The reason we're able to do this is that our founder, co-founder and CEO Evan Spiegel is a once in a generation product genius. And this has been a narrative around Snap for a long time.

• 39:28David Rosenthal?

  Actually, again, to plug our previous episode, shameless self-promotion here. The previous Snap chat episode, we actually dive into Evan's history and he's not just some random kid who dropped out of college to found, you know, another app company. It was pretty clear from his early days at Stanford that he was, he had some very special talent. He talked his way into the D school, which is normally reserved only for graduate students and is probably the most famous design school in the world. David Kelly, who founded the D school and was the founder of IDEO, the consulting firm, ended up becoming Evan's, you know, direct advisor.

• 40:13David Rosenthal?

  And Scott Cook, the chairman of Intuit and famous Silicon Valley luminary, he met Evan while he was at Stanford. He hired him immediately to help work on a product that he thought was super important at Intuit. He does have a lot of talent and that is on display in the S1. I mean, you read the product section and. Like Ben was saying, I mean, it's some of the most clear thinking, really compelling understanding of users and problems and why Snap's product, why their products are built the way they are.

• 40:50Speaker 00

  Totally, and it's, we should also call out, they talk about, they don't really, in the S1, talk about Evan Spiegel as the product genius, that's sort of like the hint, hint, nudge, nudge, and like the way that the media has sort of spun this, but they talk about, you know, Snap is an innovation company and that we as a company have done these things, and they definitely don't refer to him as like a once in a lifetime product genius, but the implication is totally-

• 41:17David Rosenthal?

  But that's clearly what they want to imply.

• 41:18Speaker 00

  Yeah, yeah, and, you know, that they have an Apple-esque secrecy about them, but it is, it would be really interesting, and we'll probably hear this in the ensuing decade from folks that have left Snapchat to kind of talk about, you know, what is the product development process there, and how does it, you know, does it sort of all come from the top, or are there a lot of trusted lieutenants? And I do know from just kind of talking to a couple of folks there, that they do the kind of old school Microsoft style thing of having internal teams that compete, so it's in actually the same way Apple sort of did too, with, you know, two different teams working on the iPhone at the same time, where, you know, a vision is laid out and there

• 42:02Speaker 00

  are two people working in secret that don't know what the other person is working on, kind of leading very small teams that are seeing who can, who can better fulfill that vision. And often you don't necessarily know that there's another person working on the same thing that you're working on, but there's definitely this notion of, you know, what we're doing requires a lot of creativity and a lot of invention and a lot of newness, and that comes from multiple people exploring different incarnations of the same vision.

• 42:31David Rosenthal?

  Yep. So that's Snap's narrative here. You know, one, we're a camera company. We're not a social network. Two, we're a brand advertising business. We're attacking TV. We're not attacking Facebook and Google. Three, we as a company and our founder, you know, co-founder Evan, and actually, you know, if you watch the the roadshow video, Bobby, Bobby Murphy, the CTO and co-founder is is super elevated in that as well.

• 42:58Speaker 00

  Yeah.

• 42:59David Rosenthal?

  So it's wrong to say just Evan, but Evan and Bobby are, you know, this team is once in a generation. You know, we are the next, you know, Apple and Steve Jobs here. That's the Snap narrative. So let's talk about the investor narrative, the media and the investor narrative.

• 43:15Speaker 00

  And actually, taking, taking a quick pause, I never even, you know, we were laying out the structure of this episode and I'm formulating my thoughts. I didn't really realize that the picture they're, they're painting by taking these little, you know, we're product innovators and we respect your privacy and we're a camera company and we're not a software. Like, all these things are like, we're the next Apple. Like, comp us against Apple. Don't comp us against Twitter.

• 43:42David Rosenthal?

  Yep, exactly. There's just one problem with that, and that's that Snapchat is a advertising-based business, not a consumer products business.

• 43:52Speaker 00

  Yeah.

• 43:52David Rosenthal?

  At least today.

• 43:53Speaker 00

  Right now.

• 43:55David Rosenthal?

  Which is the perfect lead in into what the slightly more skeptical investor narrative is. And, and point number one here, which anybody who's been, been following, you know, the story is, will be unsurprising, is, hey, Snapchat has a growth problem, a user growth problem, and that problem's name is Instagram.

• 44:17Speaker 00

  Yeah, yeah. And there's a pretty interesting.

• 44:22Speaker 00

  Graph of their their user growth that looks a lot like an S curve like Kind of slower in in the beginning of 2014 speeds up you get a nice steep slope till about What Q2 of 2016 and then you have like three Three quarters in a row of kind of like leveling off and that really aligns kind of coincidentally with The

• 44:48David Rosenthal?

  The launch of Instagram Stories.

• 44:50Speaker 00

  Yeah, exactly. And that's what in August.

• 44:52David Rosenthal?

  You know, it says like, hey, Snapchat invented this format and We we are taking this format and we are bringing it to our network because we the Facebook Universe Is the dominant social network and yeah Snapchat will tell you they're a camera company but like You know, you share you share your pictures with your friends and we are the friends company.

• 45:16Speaker 00

  Yeah, and it's it's interesting to to give a little bit more context too. So Snapchat has what like 160 million active users? Something.

• 45:28David Rosenthal?

  So Snap has 158 million daily active users.

• 45:33Speaker 00

  And you know, when you when you look at that, it totally pales in comparison to to Instagram and and Facebook proper. But the important delineation there is that

• 45:44Speaker 00

  It's basically domestic versus international like there are Snapchat's got real good saturation in the US. They have very, very little adoption in in other countries and and not only do they not have great adoption, but they're not monetizing well elsewhere anywhere.

• 46:00David Rosenthal?

  Well, and here's here's where, yes.

• 46:04David Rosenthal?

  Very true, but this is where the rubber really hits the road, you know. In since Instagram launched Instagram Stories to compete much more directly with Snapchat product wise In August 2016. From the quarter before then until now, Instagram has added 100 million daily active users. They went from 300 million to 400 million in seven months. Which is an acceleration of their growth, a huge acceleration. In that same time Snapchat has flatlined. They added.

• 46:42David Rosenthal?

  15 million DAU in the same, in the same period, which is lower growth than they, much lower growth than they had earlier than that. So like this is a, this is not a good narrative for Snap.

• 46:55Speaker 00

  Yeah. And so then the question is, if you start to think about sort of what each of these companies has going for them, Facebook and Instagram have a structural advantage where they can buy their time and wait and know that they have great teams that, that can implement these features in an appropriate way for those platforms. And then get those insane 100 million DAU spikes like that by figuring out the right way to incorporate that mechanic into their product. What Snapchat has going for them is they fundamentally believe that, or I guess to invest in Snapchat right now, and we can revisit this later in the conclusion. You have to believe that Snapchat can do things that are more innovative and more interesting in a product sense

• 47:40Speaker 00

  for new users, then Facebook will be able to leverage their structural advantage in the industry and copy. And so what that sort of comes down to is can, because I don't think there's necessarily like a time window advantage. Let's say Facebook copies everything three months or six months after, after Snapchat. I don't think that Snapchat's going to have this advantage of like, they're going to get out ahead and they're going to, they're going to, you know, get enough users in that short window. I don't think that's going to happen. I think the thing that you have to believe is that Snapchat can figure out a thing to do that gets a whole bunch of new daily active users that Facebook is not in the position to copy, that having that existing network and that those existing products

• 48:24Speaker 00

  doesn't give them the leverage to, to, you know, keep building these roadblocks for Snapchat.

• 48:29David Rosenthal?

  Well, and this for me is really, you know, in our, in our episode that actually is going to come out after this, but that we recorded, recorded earlier this week with, with our crossover episode with the internet history podcast coming out next week. Thank you, Brian. That was a blast. But I talked about how in the Uber Didi episode we did with Brad Stone, this episode and, and that, that one that's coming out next week. Really has made me think about competition and moats. And man, does Facebook and the Facebook universe, the Facebook app universe, including Instagram,

• 49:11David Rosenthal?

  they have this enormous moat. As long, if you think about this as a competition between social networks, Facebook is the social network. They have it. It exists. And then you look at who, where is Snapchat's core user base? It's in teens, pre-teens and then teens, who were building their social graph online for the first time and they could build that on Snap. But Facebook has literally the entire existing world. So Snap can go after the young folks. And that's, you know, they have certainly made inroads and Facebook is definitely paying attention. But Facebook and Instagram have everybody that they can bring, they can bring a gun to a knife fight.

• 49:56Speaker 00

  Yeah. And then that, I continue to think like, will Snapchat be able to come up with something where that's actually not an advantage? Where like,

• 50:05David Rosenthal?

  Exactly.

• 50:06Speaker 00

  There's, imagine like, there's a battle in a canyon and there's the, you know, incumbent that's got 100,000 soldiers that are all blocking the middle of the canyon. Is there something where like, you know, Snapchat can get up on the side of the canyon and tiptoe along and even like waltz past all them and they can't do anything about it because they can't get up the canyon? Like, is there another dimension here other than tons of users that are already using that app on their phone that is just going to completely blindside Facebook? You know, is it new hardware that they're not on? Is it, it's hard to imagine what these things could be, but the dollars into Snapchat, I think have to be a bet that they will figure that out.

• 50:49David Rosenthal?

  Yep. And I think this is, this gets at the heart of what Snapchat is trying to say, which is, we're a camera company. And

• 50:58David Rosenthal?

  To be a bull on Snapchat right now, you have to believe that they are they are going to basically pivot the market into a dimension that Facebook can't compete with them on. And, and, and they are doing that, like, you know, they have lenses. Facebook and Instagram can't match them on that. The technology is fundamentally better and different with Snapchat.

• 51:30David Rosenthal?

  But, but when you start thinking, where does that play out? Does that, does that lead us into augmented reality? Well, of course, Facebook has Oculus.

• 51:41David Rosenthal?

  And, and, but I would also say, you know, they have stumbled a bit. So it is a much more even playing field there. But I think that's the bet you have to make if you're going to bet on Snapchat right now, that they're going to outrun Facebook into this new paradigm.

• 51:57Speaker 00

  Yeah, and perhaps, you know, one of the things, or actually the criteria that we evaluate, if an IPO was successful or not, which we actually, we won't be able to fully do on this episode since it's so recent. But what did that capital infusion, in this case, the 3.4, 3.4 billion dollars that they raised from selling those shares? What does that capital infusion allow the company to do that they wouldn't have been able to do otherwise? Like, did they, did they effectively use IPO-ing as a vehicle to raise capital to go do something new as a, as a company? And maybe it's, it's to, to do new hardware stuff. Like, maybe it's to figure out what that next frontier is.

• 52:38David Rosenthal?

  Well, they've already shown, you know, they think of themselves as a hardware company.

• 52:42Speaker 00

  Right, right. And I think actually now they're selling, it's, it's not just the vending machines with, with spectacles. I think they sort of quietly stood that up online and you can order them, have them shipped now.

• 52:52David Rosenthal?

  I think that's all right.

• 52:55David Rosenthal?

  So that's, uh, yeah, we've rattled on that, but they're really quickly to cover and then wrap up on narratives. There are two other aspects to the, you know, the sort of press narrative about Snapchat right now. One is that Snap has an infrastructure problem. And, you know, they've, it came out as part of the IPO that they've agreed to pay Google. They primarily run on Google, Google Cloud Engine, $2 billion over the next five years. They're also paying Amazon and AWS another billion dollars to supplement that with AWS. And as a result of all this spending relative to the still, you know, large and impressive, but minor revenue they have compared to Instagram and Facebook.

• 53:40David Rosenthal?

  Snapchat's actually gross margin negative or was until very recently. So their infrastructure costs were higher than, than the revenue they were making from advertising. And that's before even paying any of their payroll costs or their hardware costs.

• 53:54Speaker 00

  Yeah. And in fact, this, the losses are so huge. This may actually be the first company to file for an IPO that has a cost of revenue alone higher than revenue in the trailing 12 months before IPO. I mean, their, their costs are-

• 54:05David Rosenthal?

  We've joked on the, on the, you know, Uber Didi episode about ride sharing going gross margin negative. Like, well, Snapchat is gross margin negative as well, or was until very recently.

• 54:16Speaker 00

  And it's almost entirely due to, to infrastructure costs. I think a second, a second cost there is rev share to, to publisher partners. But, um, I mean, the cost of revenue in 2016 was $452 million. So a, a, a large amount of that, I mean, if, if you figure out how much they're paying to, to Google year over year, a lot of that is, is for the Google Cloud infrastructure. And I think the way that Snap wants you to view this is we are paying a lot of money to stay nimble right now. Like you, the, that-

• 54:52Speaker 00

  People that are pushing back on Snap would say, number one, why don't you have your own infrastructure to buy now? Why don't you invest in your own data centers? Number two, how the heck are you using so much compute in Google's data centers? Like, why, why is it so expensive on a, on a compute per user basis? And I think it's, it's just, you know, the, the nature of all this really advanced augmented reality stuff that they're doing completely on the fly.

• 55:16David Rosenthal?

  I think it's lenses.

• 55:17Speaker 00

  Yep.

• 55:18David Rosenthal?

  Well, I think it's a combination of lenses and the fact that they are delivering and storing just an enormous amount of, of, it's not photos, it's, it's video on Snap. I mean, the bandwidth costs are enormous.

• 55:35Speaker 00

  Yeah. And the, the, the, the thing you have to wonder is, and also the thing you would have to believe as an investor to want to, want to do this is, does paying a ton for Google to handle their infrastructure and keep that completely outsourced allow them to try things faster, which is the true kind of inherent value of the company is that they can experiment, get things right and roll out really good products quickly? Like, do, do you believe that? And do you believe that it's worth all these computationally expensive things that, that they're doing on a per user basis? Because the, the cloud costs, it's not like those are fixed and that like it'll be amortized by all these users coming on.

• 56:16David Rosenthal?

  No, it scales with users.

• 56:18Speaker 00

  That scales linearly with users. Yeah. Yeah. So number one, I think you have to say, is it worth it to, to be paying that on a per user basis? Number two, should they be paying that premium to, to keep it outside the company so they can move?

• 56:31David Rosenthal?

  Yep. And then, so that's the, that's the second part of the press narrative. And, and then the third part is, you know, actually, I think, and when you look at how the IPO performed, when it, you know, priced above the range and then traded up, had the 44% pop yesterday and is trading up again on day two, I think the third part of the world at large narrative is that Yes, despite those problems, Snapchat and Evan and Bobby really are fundamental product geniuses and they deserve the credit that they are lavishing on themselves in the IPO.

• 57:14David Rosenthal?

  But, but I think the market has shown over the last two days that they're willing to give Snapchat a pass for now, but they'd better deliver soon.

• 57:25Speaker 00

  Uh, yeah, sure. The, I mean, the frenzy and the excitement that I'm, I'm attributing all of the oversubscribed nature of the IPO, the pop in trading, the pop the next day. Like, we just haven't had a big IPO in tech since Twitter. Like, I think this is really, you know, the, this is a great stat. 15, the 15 US-based tech companies that went public in 2016 raised a total of $1.44 billion and Snap raised 3.4. Like, it was, it was the first social media, yeah, the first social media IPO since 2013 in Twitter. It's the first tech IPO of 2017. There's incredible pent-up demand. So, I'm gonna, I'm gonna

• 58:09Speaker 00

  evaluate the, you know, massive volume of, of people buying shares at pent-up demand. But I think-

• 58:19David Rosenthal?

  But I think the rationale that you have to believe to buy those shares is that this is a special company. And if you just look at the numbers and you compare it to, and if you think it's a social network and you compare it to Facebook and Instagram, it's not a special company. It's actually a pretty bad one by the numbers.

• 58:39Speaker 00

  And here's, here's the craziest thing, too. Like, they're, they're gross market margin negative. We're making bets on the people theoretically coming up with future products that haven't been invented yet and we're buying on a story. And that, to me, doesn't sound like an initial public offering. It sounds like a seed deck. Like, it sounds like-

• 58:59David Rosenthal?

  Seriously.

• 59:00Speaker 00

  If I'm at a venture firm, those are the things that I look for, like, team, like, product sensibilities. Like, these are the things that I would write a, you know, one or $2 million check for, for somebody that hasn't built anything yet. Not the sort of ways on which I would be evaluating a public security.

• 59:17David Rosenthal?

  That's such a good point. And I think, man, thinking about this this way, I think nothing better encapsulates the time in which we're living in tech where an IPO prospectus and process looks like a seed deck and a seed process. I don't know if that's a good thing or a bad thing.

• 59:41Speaker 00

  Yeah.

• 59:41David Rosenthal?

  That is the reality in which we live today.

• 59:44Speaker 00

  I'm getting all worked up over here and I don't, I actually, I agree with you. Like even though it's a lot of the same.

• 59:50David Rosenthal?

  This company was gross margin nega-, I want to just highlight this. This company was gross margin negative. That means they were selling dollars for 50 cents or 90 cents or whatever until like a couple of months ago. And they are now a, you know, 35 billion plus market cap public company.

• 1:00:12Speaker 00

  Yeah. And it's, it's not just like Twitter where they weren't profitable because of their massive operations. And then actually Twitter never became profitable.

• 1:00:21David Rosenthal?

  Right. Like going public without being net income positive is, is a common thing.

• 1:00:26Speaker 00

  Yeah.

• 1:00:26David Rosenthal?

  But going public while being gross margin negative is a very uncommon thing.

• 1:00:31Speaker 00

  Yeah. Yeah, David, I, if you have any dollars to sell me, I got, I got 50 cents for you and then go run a business off that revenue.

• 1:00:41David Rosenthal?

  I am a VC.

• 1:00:45David Rosenthal?

  Anyway, so the point of all this, we've, we've spent a long time on this section and listeners, let us know what you think of it. But I think what's just so fascinating about this event and this company is you can paint it as Snapchat has very effectively as this is the future. And this is the most compelling, most interesting, you know, company to hit the public markets since Facebook. And that we are riding a very different wave than Facebook. Or you can paint it as like, this is the beginning of the end here. And, and, and both, the moment that we're at right now is just so interesting because there are great arguments on both sides.

• 1:01:30Speaker 00

  Yeah. And I think it, the, the best way to summarize it is this is the public market sitting down with Evan Spiegel at a table, looking him in the eye and saying, and Evan saying to public investors, do you trust me?

• 1:01:43David Rosenthal?

  Exactly. And, you know, going back to the start of the show, you know, Evan getting this, um, this bonus, this huge bonus, you know, almost more than $600 million in, in, in stock grants for a successful IPO, you know, um, it's really coming down to, uh, to that.

• 1:02:02Ben Gilbert?

  Yep. Yep. Yep. All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 1:02:18David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 1:02:34Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 1:02:49David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 1:03:13Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 1:03:32David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:04:02Speaker 00

  Truly insane numbers, and that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at lagora.com/acquired and just tell them that Ben and David sent you.

• 1:04:27David Rosenthal?

  All right, should we move on quickly to the rest of the show? Do what would have happened otherwise?

• 1:04:31Speaker 00

  Yeah, yeah. So I mean, the thing I'm sitting here wondering is, do they have to go out now? Could they have continued to fund their operations by what they had in the bank, raising more private money? Is it advantageous for them to go out now? Love to hear your thoughts on that.

• 1:04:48David Rosenthal?

  They had no choice. I mean, they were burning money. I think, where did I put the? I had the numbers in my notes. Don't have them offhand, but I think Snap had, even after the huge amount of money they just raised in the private markets like less than a year ago, they had just about a billion dollars in cash on hand, and they burned free cash flow of almost, I believe, $700 million last year. And that's, I'm sure, going to be even larger this year. So like, they were going to be out of cash if they didn't get this capital infusion, one. But two, also, I think, like we've talked about, like, this was their opportunity, and this was the time for them to tell their story.

• 1:05:31Speaker 00

  Yep. Yep. I guess it, the name of the section is what would have happened otherwise, so that we have to sort of explore other options. Could they have been acquired? And who would have acquired them at this point? They're 10 times more valuable than the last time Facebook tried to acquire them. But I mean, for what they dumped on WhatsApp, would they have? Let's say it was even, let's say it's the standard public market 40% premium. Like, they, I think, what was their, they went out at a $24 billion market cap. So, you know, would, what, like 33, 34, 35?

• 1:06:15Speaker 00

  Would Facebook have paid that much for them? And would they have accepted it?

• 1:06:20David Rosenthal?

  I don't know. I mean, we ended our, our last Snapchat episode with, um, you know, I was arguing that, um, we were asking the question, should Facebook have offered more to try and buy Snapchat back in 2013? And, um, I argued, no, because, because just this, the vision and the culture of, of the culture of Snapchat and their vision of their product is just anathema to what Facebook is. Um, and, uh, and, and we've seen that play out even more so now. I mean, Facebook, you know, they have Instagram. They have Instagram stories. That's doing great. Instagram's growing faster than ever. Um, why would they pay $35 billion for Snapchat right now?

• 1:07:05Speaker 00

  Yeah. Yeah. Yeah.

• 1:07:07David Rosenthal?

  They have Oculus.

• 1:07:09Speaker 00

  Yeah. Yeah. Let me throw out another hypothetical future for you, and this could still happen. So this is not somebody buying Snapchat, but rather the reverse. So we live in a world where Twitter, or I'm sorry, Google and Facebook are the, the vast majority of, of, um, social network-based advertising that's, that's, uh, being bought. And they're, they're totally eating into all programmatic and display also. They're the mega giants and Facebook gets these economies of scale for their advertisers by, uh, adding additional networks into the portal. So they have channeled these advertisers. The advertisers are used to buying ads on Facebook. They buy

• 1:07:50Speaker 00

  Instagram and then suddenly bam, now I can also just upload a different image size and advertise on Instagram too. So what if Snapchat's way of getting into that competition is starting to aggregate anyone that's left? So, you know, right now Twitter is, is valued at $11 billion. Their, their market cap's $11 billion and That's probably too high. Like if that was lower, then somebody would probably actually pick them up. But right now, they're kind of priced too high for anybody to feel good about that purchase. If they continue to topple, Snapchat's got new money in the bank. They've got this really, you know, really high market cap where they could do a stock

• 1:08:32Speaker 00

  deal. Like, what if Snapchat bought Twitter and then enabled advertisers to have a single portal to buy, you know, buy advertisements on both platforms and then sort of went on a spree? It feels completely antithetical to me to Snapchat's DNA. And perhaps there actually is no economies of scale since those ad formats are so different. But it sure paints an interesting picture of what could Snapchat start to do with this cash they've just raised and this, this concrete, you know, public market validated valuation?

• 1:09:03David Rosenthal?

  Yeah, actually, that's really interesting. I think what, and also another interesting question is, what if it's not Twitter, but what if it's Fox? Or what if it's, you know, what if it's a television media company that Snapchat would buy?

• 1:09:24Speaker 00

  Well, they've got that relationship with Viacom. I don't know if that still exists, but they were, Viacom was, I think they might have dissolved that, but Viacom was their channel, channel sales for a while for all the Snapchat ads.

• 1:09:36David Rosenthal?

  Yeah. I mean, and Snapchat is, they are an LA-based company. You know, the chairman of the board is, I believe it's, is it Michael Litton, I think, who was the Sony Entertainment CEO?

• 1:09:50Speaker 00

  Yeah.

• 1:09:51David Rosenthal?

  You know, that, that is, in as, in many ways, Hollywood and media and television is as core to Snapchat's DNA as Silicon Valley and tech is.

• 1:10:03Speaker 00

  Totally. Totally. And the one other, before we talk, move into tech themes, and this is probably, this sits right on the border of what would have happened otherwise in tech themes. Is there a

• 1:10:15Speaker 00

  Was this the right way for Snap to go out? And did it get them the right investors? So what I mean by that is Snap's a company that even more so than any of these other tech companies is going to potentially have a real tough time with these quarterly earnings. And if they got themselves a bunch of retail investors that were short term and excited for the pop and got in because there was all this like excitement and demand and they didn't get these long-term investors, like here's the counter example. Amazon was extremely clear in their S1 and somehow built this incredible investor base who was willing to wait decades for them to start being profitable.

• 1:10:55David Rosenthal?

  Yeah, it's that great line that Tom said on our episode of, you know, that Jeff always says you get the investors you ask for.

• 1:11:02Speaker 00

  Yep, yep. And big question for me here is did Snapchat ask for the right investors? Did they get the right investors? And will they be able to stand up to the scrutiny of quarterly earnings calls for those investors?

• 1:11:14David Rosenthal?

  But here's where it comes back though to the beginning of the show. You know, the investors they got, what do they not have? They have no say in the company whatsoever.

• 1:11:28Speaker 00

  That's right.

• 1:11:30Speaker 00

  So does it matter? Well, I mean, it matters in the sense that like their share price would like.

• 1:11:36David Rosenthal?

  Well, yes, of course they have a say in the share price, but Snap just raised all this money that they can use to fund all the product development for the next, you know, at least couple of years. They have this room to run.

• 1:11:50Speaker 00

  Honestly, they just raised their, they basically raised one and a half of their Google bill.

• 1:11:56David Rosenthal?

  Yeah. For their, for their next wave that they're tackling.

• 1:11:59Speaker 00

  Yep.

• 1:12:02David Rosenthal?

  Interesting questions. Should we move on to tech themes?

• 1:12:06Speaker 00

  Yeah, let's do it.

• 1:12:10David Rosenthal?

  So we'll be quick here since we spent so much time on, and I feel like covered a lot of this on the rest of the show. But for me, I mean, the biggest one here, thinking about all this was just, you know, what we've talked about so much on this show of waves and technology waves and thinking about how Snap very clearly, despite what they're saying in their S1, you know, they started with the mobile wave and they were a social network on mobile. But the future of Snap, if it will be the one that they want, is going to be them riding a very different wave. And I'm just reminded of two things.

• 1:12:53David Rosenthal?

  One, the Facebook story and our Facebook IPO episode and how, you know, Facebook was riding the web 2.0 wave and then realized through the IPO process that they needed to paddle over and conquer the mobile wave. And I wonder, it seems to me very clear that something similar is going on with Snap right now.

• 1:13:17Speaker 00

  Yeah, and are they paddling over into the AR wave? Is that what you're?

• 1:13:21David Rosenthal?

  Well, whether it's AR or, you know, I don't know how yet how we're going to characterize this wave, but it is. It is, well, it's, you know, I think Snap says it really well. It's the camera wave, you know, it is when a camera becomes about inserting technology into the world around you.

• 1:13:45Speaker 00

  Yeah. Yeah. That's interesting. Most of my tech themes we've covered, you know, a lot of like winner take all network effects and the, the ability to copy well, cord cutting, moving from TV to, to, to mobile, F morality, how it's the anti-Facebook, you can really be yourself. But the one that we haven't really touched yet is that.

• 1:14:09Speaker 00

  The viral coefficient of Snapchat is different than the more successful social experiences like Facebook. And they're, to me, a big risk factor is that their

• 1:14:24Speaker 00

  key product pro is also potentially their key business con. Where on Facebook and LinkedIn and Twitter, like it's a follower grab. I am directly incentivized to have a wider audience because the way that you use those platforms is to try to get as much engagement as you can on those platforms. Like it's this called social media because it's truly media. It's you speaking to an audience and people engage with you, but it's more media than communication. And with Snapchat being more communication, and the way I use Snapchat is there's like five to 10 friends that I have, that I snap with at all. And that happens in kind of a power law distributed way where like,

• 1:15:10Speaker 00

  and maybe that's not exactly the right mathematical distribution, but like there's one person that I snap with the most. Then a few other people that are kind of, and then the rest of those 10 are not that much. And so the reason why I think their product has such high engagement, but like the issues that we're talking about are in growth are the fact that the product itself lends itself really well to engaging a bunch with a very small set of users, which isn't great for growing into new markets. So as we start to think about the network effect here, like the fact that there's a ton of people in North America using it and some people in other markets using it, it doesn't necessarily mean that it's going to catch on in Belarus because there's nobody in Belarus that has somebody that wants to snap them somewhere else because it's all about these small pockets.

• 1:15:56David Rosenthal?

  Yep.

• 1:15:56Speaker 00

  And I, yeah.

• 1:15:58David Rosenthal?

  It's, and it's interesting, you're seeing apps like, like Snow, which I, is Snow part of Line? I think.

• 1:16:08Speaker 00

  That's the, that's the Chinese Snapchat.

• 1:16:11David Rosenthal?

  I think it's, it's either Japanese or South Korean. But, but anyway, it is, it's that, it's, it's the, you know, Asian Snapchat. It's a really good point. It reminds me of, you know, the Uber versus Airbnb. Like Airbnb has a very clear global network effect.

• 1:16:29Speaker 00

  Because people travel.

• 1:16:30David Rosenthal?

  Uber not so much.

• 1:16:32Speaker 00

  Yeah.

• 1:16:33David Rosenthal?

  Is something similar happening here?

• 1:16:35Speaker 00

  Yeah, totally. That was a, we talked about that with Brad Stone listeners on the previous episode and Brad made this great point that Airbnb actually has a stronger global network effect than Uber does because with Airbnb, you, you know, you're traveling to all these places, you're bringing Airbnb to new places, you're looking for Airbnb in new places. And with Uber, like it, other than the technology being hard, there's not as much of a network effect moat because how hard is it really to download whatever the version of Uber is in another city? And that's why we're seeing all these clones get so much traction.

• 1:17:06David Rosenthal?

  Yeah. And maybe I'll pile on with one more real quick tech theme, but yeah, while we're talking, that episode with Brad too, was just, it was such a treat to have him on. Can't recommend it enough to listeners. But one of the concepts he talked about was that like, there was this idea in ridesharing that raising capital was a moat and an advantage. And it turned out not to be. And looking at Snapchat, like it made me think about that as well. Like Snap has raised so much money and now with the IPO even more money. But they're still, you know, they were gross margin negative. You know, that hasn't helped

• 1:17:50David Rosenthal?

  them build a great business thus far.

• 1:17:53Speaker 00

  Yep. Yep. Yep. All right. Should we grade it?

• 1:17:56David Rosenthal?

  Cool. All right. Let's grade this sucker.

• 1:17:58Speaker 00

  Cool. So listeners, we should again clarify that we are grading on the criteria of what will this move allow them to do? Like was the IPO a good move? And, and did the idea of doing this IPO, number one, was it well executed? Number two, does it, does it put them in a good position? And so I have to set aside a lot of my feelings of the company in general. Like if I feel like they're set up for success and they're not way ahead of their skis in terms of the

• 1:18:40Speaker 00

  Well, actually, I guess they're related because the fact that they've got a market cap that is so ahead of revenue is totally tied into this. But I guess the point I'm making is if they were going to IPO and they needed to IPO, they did it extremely well. Like, I am an A on execution on this thing so far, a day in. And their ability to raise the capital that they, you know, fight or flight, do or die, needed to raise and do it at least so far really well. And I think that's an A with like a ridiculous amount of variance. I thought about, Dave and I were talking about before the show, like, should we even grade it?

• 1:19:21Speaker 00

  I mean, I think that it's too early to tell, but an A on execution, an A on what it sets them up to do in the future, staying nimble, potentially making interesting acquisitions.

• 1:19:34Speaker 00

  I don't know actually how this will help them grow into new markets. I think that's still the biggest, scariest thing for me. But in terms of how to go raise money and the way that best set them up for success, this is an A.

• 1:19:46David Rosenthal?

  Yeah, well, and I think the parallels to our Facebook IPO episode are just so great right now, are so perfect and so apt. You know, we graded the Facebook IPO and I think we gave it two grades, you know, a grade for the actual IPO itself and then a grade for how that event, you know, influenced the trajectory of the company over time. And the IPO was terrible, but what was, what we learned from that story was that experience really made Facebook what it is today. It kind of drove them to much further greatness.

• 1:20:32David Rosenthal?

  And I think I completely agree with you. Like, this IPO was brilliantly executed by Snap. You know, they told their story so well and positioned themselves perfectly. You know, one need only look at how the performance has gone over the last two days. Granted, it's still very early, but versus Facebook's first two days. But the question and the real grade that matters, you know, we're going to have to come back for at least, you know, round three, if not four and five down the road on this one.

• 1:21:06Speaker 00

  Yep, yep. I totally agree. I almost feel silly for giving it an A. Like, there's just so much variance and so much we don't know, but...

• 1:21:13David Rosenthal?

  Well, but I think we can definitely grade execution on the IPO and no question, this was an A.

• 1:21:19Speaker 00

  Yeah.

• 1:21:20David Rosenthal?

  You know, they took, there were huge headwinds here with Instagram Stories launching and growth slowing and being gross margin negative. And they've spun this great story about Snap as a camera company, Snap as a brand advertising company, Snap as the most innovative and interesting product company of our generation. And it's worked really well.

• 1:21:46Speaker 00

  Totally, totally. Before we move on to carve outs, I have a couple little kind of fun, fun points to note about this IPO. One is that there's a great Chris Sacca tweet from yesterday where he points out that he's like, congratulations to Snapchat, but guess who who's not celebrating and making it big from this IPO? And he goes, me, the guy that didn't answer this email. And he has this email that he just has unanswered in his inbox from Bobby in 2013, 2014?

• 1:22:17David Rosenthal?

  Well, I think it was even 2012.

• 1:22:19Speaker 00

  12. Yeah, saying, "Hey, really enjoyed your talk. Would love to have you in the office and chat." And yeah, it's just, it's a reminder of what a crapshoot seed stage investing is.

• 1:22:30David Rosenthal?

  Totally.

• 1:22:32Speaker 00

  We'll put a, we'll put a link to that in the, in the show notes. And then another one is, is really interestingly, so you get this sort of 24 hour window to go and talk publicly about all your financial stuff after your IPO, before you start being really held to, to all the SEC regulations about what you're disclosing and when. And normally you see all these, these execs taking advantage of this, going on all these different shows and talking to media outlets after, on the day their IPO, drumming up support for it. And like, Spiel and all the other execs weren't anywhere to be found. They, they headed over to Goldman Sachs, which was one of their IPO managers, and it wasn't their lead left

• 1:23:14Speaker 00

  because that Morgan, Morgan Stanley led the IPO. And they hung out there for the day. And they did one example, one interview with the LA Times to kind of promote the LA startup ecosystem. And it's just like Snapchat gonna be Snapchat, you know? They're, they don't do things the way everyone else does things.

• 1:23:31David Rosenthal?

  I think if there's one lesson from, you know, the whole, all of Snapchat's story thus far is exactly that.

• 1:23:40Speaker 00

  Yep. Yep. Yep. Cool. Should we move into carve outs?

• 1:23:44David Rosenthal?

  Let's do it.

• 1:23:46Speaker 00

  All right. So mine, so listeners for acquired, we have done three episodes this week. We did the episode with, with Brad Stone. We, we've got this one. And then shortly hereafter, we'll have a super cool episode with Brian McCullough from the Internet History Podcast as a crossover. So I have, I have not been doing as much, much reading as I'd like to this week, but I have, I did listen to Ben Thompson on the Bill Simmons podcast, and I haven't listened to the Bill Simmons podcast in a while. It's so freaking good. Like there's, it's largely about sports. So if you don't like sports, most episodes won't apply to you. But number one, the episode with Ben is great. He compares, Bill, Bill has these incredible sports analogies. So he compares like Twitter, Twitter is like the Milwaukee Bucks of tech companies. And

• 1:24:31Speaker 00

  they have like this great analysis of that.

• 1:24:33David Rosenthal?

  That's great.

• 1:24:35Speaker 00

  And, and, and it's just so.

• 1:24:37David Rosenthal?

  What's, what's Snapchat?

• 1:24:38Speaker 00

  I don't, I don't know. I don't think they got there. It's either the Cavs or the Warriors, or maybe it's the team that will dethrone one of them. I don't really know.

• 1:24:46David Rosenthal?

  Yeah. It's, if Instagram and Snapchat, you know, who's the Cavs and who's, who's the Warriors?

• 1:24:53Speaker 00

  Right, right. But that, that episode's great. The Malcolm, Malcolm Gladwell was on a few episodes back that was really great. And he's just such an enjoyable personality to listen to. And I feel like, honestly, David and I, as podcasters, are always looking for, for who's producing really great content and how they're doing it and things we can add to this show. So I know that I've definitely taken a page from, from Bill's book.

• 1:25:16David Rosenthal?

  Yeah. Mine, I'll do real quick, but it, but it's apt. I started listening to Sun Suze, The Art of War, this week on audiobook. And I finished it because it's incredibly short, which I'd forgotten I'd read it a long, long time ago.

• 1:25:32Speaker 00

  That's so appropriate for Snapchat.

• 1:25:33David Rosenthal?

  So appropriate because as we talked about on the last episode, after Zuck came down to, came down to LA, and I can't remember if it was when he offered to buy Snapchat, or when he said, hey, we're going to launch Poke and we're going to crush you. I think it was the first time when he said, yeah, we're going to launch Poke. We're going to crush you. Evan went out and he bought copies of The Art of War and he gave them to each one of his employees.

• 1:26:02David Rosenthal?

  But it's such a good book and, and, you know, applicable as, as many people, many, much ink has been spilled to business and so many other things in life, but, but the coolest thing about it, and I think what, you know, doesn't, a lot of people don't appreciate about it is that the, the book is about not fighting and that the idea that the, the best victory that you can achieve is, is a whole victory where you don't destroy the other side. You capture the other side. And, and that actually fighting and actually entering, entering into battle is terrible because

• 1:26:46David Rosenthal?

  you're, you know, even if you win, you're, you're damaging what you want to capture. And, and you're sustaining, you know, damage yourself. And I think it's just so apt for, when you think about how Snap has played this whole, you know, the past couple of years really, but, but this whole IPO process, we're not going to fight Facebook directly. You know, we're not a social network. We're a camera company. Like it's got Sun Tzu's fingerprints all over it.

• 1:27:14David Rosenthal?

  Love it. It's perfect. All right, listeners, now is a great time to talk about one of our favorite companies, Statsig.

• 1:27:23Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:27:33David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:27:54Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags and product analytics into one unified system. So teams can ship safely, test rigorously and directly link what they changed to how users actually behaved.

• 1:28:06David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:28:17Speaker 00

  I think that's our show. We, uh, listeners, thank you so much for joining us. We, uh, we love iTunes reviews. Leave us a good one and we'll read it on the mailbag next time. Um, it helps us grow the show. It helps us, uh, bring on more sponsors potentially. It helps us bring on better guests. It helps more listeners find us and, and set the flywheel in motion. So we really appreciate that. Any, uh, any sharing you want to do, uh, Twitter, Facebook, obviously. All those things help. Snapchat, it's actually unclear if it helps since it's unmeasurable. (laughing) Uh, join us in the Slack. Go to acquired.fm. It's pretty easy to join. A little sidebar on the right. We, uh, we have great conversation there. Till next time. We'll see you next time.

• 1:29:02Speaker 00

  Thanks, everyone.