Snapchat, the video streaming company has been making news in India and it does not look good. The CEO of the company, Evan Spiegel apparently said that Snapchat is an app only for rich people, so there is no intention of expanding into ‘poor countries’ like India and Spain. Following this, Indians are enraged, though it is unclear whether it is the same case in Spain. Snapchat has got mired in a global controversy at a very wrong time as it has reportedly been suffering from losses all across the board. Instagram, which copied Snapchat’s Stories feature, is now witnessing more Daily Active Users than the latter. Facebook too will follow suit. And now, after the alleged comment made by the CEO, Indians are uninstalling the app from their smartphones while giving it the minimum rating. Snapchat has always been known for its secrecy, whether it is about its products or the details on numbers. The CEO himself exercises too much control on Snap and Snapchat, which is its main product. Even after the company’s IP, Spiegel and co-founder Bobby Murphy hold major control in it. To provide context, the alleged comment is a part of the lawsuit filed by an ex-employee Anthony Pompliano who has accused the company of misleading advertisers by fudging numbers.
What is the issue?
Evan Spiegel alleged made the comment two years ago, according to a Variety report. Spiegel tried to say that countries, where most people do not use expensive phones and may not have high-speed internet in all areas, are not the countries which should be targetted in terms of expansion. Spiegel allegedly cited Spain and India as examples. This came to light when former Snapchat employee Anthony Pompliano filed a lawsuit against the CEO. He was hired by Facebook. The lawsuit was not against the poor countries statement, but mostly about ‘number fudging’ by the company. The unredacted court documents regarding the allegations and claims are currently available on Scribd.
What did the lawsuit claim?
The lawsuit by Pompliano alleges that Snap bloated numbers and lied to advertisers and investors regarding its growth. However, a report in Fortune says that Snapchat has claimed that it has ‘nothing to hide’. It has also put out some documents in the case it is fighting. The lawsuit filed by Pompliano claims that Snapchat’s claim of 100 million users was way higher than the 97 million counted by Flurry. It also claimed that the growth of Snapchat was very slow, under 5 percent, though claims were made of a double-digit growth. Pompliano also claimed that Snap maligned him and was, therefore, unable to find a job. This has been refuted by Snapchat, which said that Pompliano found a job soon after he was fired and there too he was removed because of poor performance. Snap said that there too he charged the company with ‘fraud’ allegations, known as Pompliano vs Brighten Labs.
Pompliano has stated in the lawsuit that when he met ‘with his initial team members who were data analysts Jie Liu and Ben Wu, they pointed out that the company had an “institutional aversion to analysing user data.” He has claimed that the senior executives of Snap Inc were ‘completely misinformed about… most fundamental user growth and engagement metrics.’
How did Snapchat respond?
Snapchat, in its reply, has denied the claims made in the lawsuit. Attorneys for the company have reportedly said that Pompliano, the former employee does not know anything about Snap’s current metric. However, the allegations and their reply are not enough for us to confirm whether the statement was actually made. The company has said that Pompliano is a disgruntled former employee because he was fired in just three weeks, Snapchat reportedly wants to move the issue into arbitration and that would mean alternate dispute redressal. Now that the lawsuit has been filed, there will be an increased investor scrutiny. The documents submitted by Snapchat claim Pompliano’s lawsuit is just one big publicity stunt.
Does Snapchat believe that India is a poor country?
The comment was apparently made with respect to the percentage of people using high-end smartphones and access to high-speed internet. Snapchat says that the application needs certain things to run the app properly. Even according to the SEC filing, we can see that Snapchat doesn’t do well with poor internet connections. The Risk Factors part on Snap’s SEC filing says this:
“In addition, because our products typically require high bandwidth data capabilities, the majority of our users live in countries with high-end mobile device penetration and high bandwidth capacity cellular networks with large coverage areas. We, therefore, do not expect to experience rapid user growth or engagement in countries with low smartphone penetration even if such countries have well-established and high bandwidth capacity cellular networks. We may also not experience rapid user growth or engagement in countries where, even though smartphone penetration is high, due to the lack of sufficient cellular based data networks, consumers rely heavily on Wi-Fi and may not access our products regularly.”
The company has similar things to say about Android smartphones:
“To continue growth in user engagement, we will need to prioritise the development of our products to operate on smartphones with Android operating systems. If we are unable to improve the operability of our products on smartphones with Android operating systems, and those smartphones become more popular and fewer people use smartphones with iOS operating systems, our business could be seriously harmed.”
In a country where most people are first-time smartphone users and many are first-time internet users, tend to conserve internet data which in itself is slow. This essentially means that it cannot be an ideal market for Snapchat.