Snapchat & Tesla Continue To Innovate
Why Scott Galloway miscalculated these innovative disruptors.
Scott Galloway is an American advertising theorist and professor of marketing at the New York University School of Business. His reputation on the future of marketing has led to; his own podcast, column and speaking at international conferences such as the National Federation of Retail (NFR). Galloway is consistently pushing us to discuss the bigger picture of innovative technologies that are shaping our future.
During Galloway’s talk at the NFR, he discussed retail's future and his predictions on what’s next for Amazon’s Alexa. You can find the podcast here, which I highly recommend listening to. He predicts that Amazon’s voice technology through Alexa will mine peoples’ purchase history, and search using artificial intelligence will synthesis products and services, freeing us from menial tasks.
But this article isn’t about Galloway’s unique ability to draw us into higher-level conversations surrounding technology and platforms or his expertise on the future of marketing through voice technology.
Galloway’s emotional conviction attracts us to his thinking; however; it can polarize his opinions and draw out the hostility he has toward some companies. Specifically, two companies innovating in their respective fields, Snapchat and Tesla. Galloway’s emotional drive pours out onto his keyboard to predict Elon Musk’s ban on being an officer or director of any public company due to his “narcissism” and “lack of impulse control” (see below).
Scott Galloway on Snapchat and Tesla’s demise:
5 Reasons Galloway’s analysis of Snapchat is imprecise.
1. Evan Speigel innovated the way social platforms work
Snapchat is what MTV was for teenagers growing up in the ’90s. Spiegal, the founder of Snapchat, brought anonymity to the younger generations as content on its platform became impermanent.
Teenagers don’t need to worry about public scrutiny on Snapchat because messages are short-lived on the platform. This is how Snap innovated the social media landscape, even before WhatsApp or Facebook Messenger came along to offer dark social (sharing content with friends in closed groups).
Anonymity will win every time. Teenagers have become more conscious about their digital footprint, and Snap offers a safer platform than Facebook, Instagram or TikTok. Parents with children entering their teen years can also feel more comfortable with kids on Snapchat where content can’t be stored publically for their entire teenage years.
2. Snapchat owns younger demographics
Snapchat is focused on targeting younger people, creating higher engagement for its core demographic, 69% of U.S. teens say they use Snapchat. Over 71 million people use Snapchat daily in Europe, which has grown significantly from 59 million in October 2018.
3. Kylie Jenner added injury to Snap’s 2018 performance
Snapchat’s user growth and performance in 2018 was hurt by Kylie Jenner’s Tweet in February that year.
Jason Kirsch covers Jenner’s influence on people‘s exodus from Snap perfectly:
4. Great CEO’s change their strategy all the time
Great leaders and CEO’s are comfortable with changing their strategies due to new data points. Evan Speigel is sitting on top of big data from Snapchat’s users, which he can evaluate to make better decisions as he did in November 2017 to make the below changes for Snapchat’s platform:
- Changing Snapchat from a closed network of friends to targeting Influencers, drawing Creators to its platform,
- Improve bandwidth to enhance platforms ability to play video,
- Market products directly to younger people,
- Improve Snapchat’s design interface,
- Changed its algorithm to sort it by highest engagement vs latest posted,
- Accept data analysis of user growth, leading to new products.
5. Snapchat continues to increase its revenue
Literally, the bottom line is that Snapchat is still bringing in millions of dollars in revenue every quarter, even though its user growth has not been as strong as its earlier years. In fact, Snapchat had stellar earnings for Q2 in 2020, generating $454 million in revenue, an increase of 17% year-over-year.
Snapchat takeaway
Snapchat has been taken to the mattresses by its competitors, going after their key audiences by copying their Stories format. However, Spiegel has shown he can adapt and continue transforming the way Snapchat caters for their audience. Only recently in June 2020, Snapchat redesigned its app updating its feature called Snap Map, which shows what friends are doing in realtime. There are now 200 million people using Snap Map every month.
Snap is the most innovative social media platform because it is focusing on its core customers. Bringing in new features copied from other platforms and channels strategically has worked for Facebook (Instagram). However, this will dilute their platforms key offering, eventually turning people away.
Innovation is key, and Spiegel knows exactly what he's doing.
Snapchat continues to innovate with products and short-lived formats that require immediate attention, like Snapchat’s ‘Happening Now’ banner which curates stories from leading partners, such as The Washington Post, Bloomberg, Reuters, NBC News, ESPN, NowThis and E! News. This strategy is aligned with one of the brand’s core value proposition ‘impermanence’.
5 Reasons Galloway’s analysis of Tesla is imprecise.
1. Tesla is a technology company
Many investors have mistaken Tesla as a car manufacturing company, similar to General Motors in the 20th century. Comparing Tesla to other car manufacturers, Scott Galloway remarks “In addition, the auto industry is a competitive, low-margin business, and is about to catch up to Tesla.” Tesla creates software and hardware not limited to and including:
- Machines to manufacture their vehicles
- Advanced sensors for 360-degree visibility around its vehicles
- Autopilot functions to make driving autonomous
- Equipment for charging stations
- Its own EV batteries
- Mobility as a retail service and much more.
2. ACES segments are overlooked
As we move into the near future, to compete for market share, competitors of Tesla will need to partner with companies across the ACES segments to offer seamless connectivity for their autonomous and connected vehicles (ACV).
Tesla already creates hardware and software in all ACES segments excluding three; Banks and Infrastructure funds, City Transport Authorities and OEM Aggregators.
Elon Musk from day one has strategically aligned Tesla to own the entire supply chain to manufacture ACVs.
3. Tesla owns better AI than Alphabet’s (Google) Waymo
Waymo’s CEO literally admitted that Tesla’s AI hardware and software are better than Alphabet’s subsidiary Waymo. Clear acknowledgement that Tesla’s innovative technologies are moving at a faster pace.
“Tesla has better AI hardware and software than Waymo”
4. Galloway is irreverent towards Elon Musk
Galloway’s ethics, pragmatism and consciousness towards social justice as we integrate our society through technology is well recognised and needed. But we all make mistakes, and Elon Musk is human. Galloway may have been furious when Musk Tweeted that Tesla reached its funding for his next investment round. This might have blinded Galloway from seeing how disruptive and innovative Tesla actually is.
Tesla’s technologies, all the way from machines that manufacture the machines that make Tesla vehicles to Tesla’s Autopilot (AI for autonomous driving), has challenged the car industry and the world to focus on lowering CO2 emissions through the electric vehicle market.
5. Massive shorts on Tesla stocks held the price down
Many investors and people do not see the value that Elon Musk brings to the world. Many hedge funds and institutional investors are still shorting Tesla’s stock price, stifling the stock value’s growth potential. This causes Tesla stocks to rise significantly when these short positions can’t be covered because Tesla’s stock price keeps moving up.
According to S3 Partners, starting in 2020, people shorting Tesla lost more than $8.4 billion. This is how much money people are betting against Tesla.
Tesla takeaway
Tesla has been validated as a technology company which is continuously innovating through digital transformation. Digital transformation is how leaders strategically define the future of businesses through investment, technology and business models.
There are two myths of digital transformation:
- Digital transformation is only about digital touchpoints.
- That it doesn’t involve people.
Elon Musk has completely transformed the way the world traditionally manufactures vehicles. This has been done through Tesla’s ability to completely reconstruct the traditional business model to manufacture vehicles, hence digitally disrupting and transforming the vehicle market.
Historically Elon Musk has created a turning point for humankind. Tesla will continue to disrupt technologies through its value chain. Tesla has created a seamless experience for customers wanting to purchase its vehicles. Every little detail is perfect, so its no wonder that Tesla customers have a cult-like appreciation for the brand.
Actions you can take to the bank.
Tesla and Snap are not going anywhere, anytime soon. Unlike most companies, Snap had cash reserves of $2.73 billion at the end of 2020. Tesla has grown its cash reserves to nearly $14.5 billion in Q3 2020.
It's clear that if you want to be successful in your business or innovate the way you’re currently operating; it comes down to one focal point.
Focus relentlessly on your customer.
Thank you for reading,
Rick Govic
