- Snapchat has hired Amazon's Jeremi Gorman and The Huffington Post's Jared Grusd to replace chief strategy officer Imran Khan.
- Advertisers see the hires as a much-needed move to help them communicate with the company and build relationships with marketers.
- At the same time, agencies need Snap to prove that it can broaden its user base away from its core teens to justify more ad spend, and some execs are getting wary that Snapchat can do that.
- During third-quarter earnings, Snap reported 186 million daily active users, down 1% from 188 million in the second quarter.
- Advertisers are shifting budgets elsewhere to Instagram or even music app TikTok to reach teens but say that retail and e-commerce are two areas where Snap stands out for brands.
Advertisers want Snap to give them more attention and they're betting on two new hires for help.
Snap announced on Wednesday that it would replace outgoing chief strategy officer Imran Khan with two positions. Jeremi Gorman is joining Snap as chief business officer from Amazon and will oversee "global business solutions, global online sales, customer operations, and business marketing," according to a memo CEO Evan Spiegel sent to employees. Jared Grusd, formerly CEO of The Huffington Post, is also joining as chief strategy officer.
The new hire announcement came a day before Snap's third-quarter earnings. The company reported 186 million daily active users, which is up 5% year-over-year but down 1% from 188 million during the second quarter. The decline in users primarily came from Android users, Spiegel said.
Snap warned investors that daily active users would decline into the fourth quarter as well.
Snap’s revenue hit $297.7 million during the third quarter, up from analysts’ expectation of $283.36 million.
Within the advertising industry, Gorman is a big get for Snap. She previously was among a half dozen high-profile execs building out Amazon's advertising business as head of global advertising sales and worked with advertisers like Universal Studios to create campaigns for "Minions" and "Jurassic World: Fallen Kingdom."
Amid Snap's significant turnover in leadership, a sinking IPO, and increasing competition from Instagram, agencies are hopeful that Gorman will serve as their go-to contact, which is something they haven't had under Khan's leadership.
"In comparison to other partners that we work with, Snap didn't really ever have an advertiser-focused lead," said Jeanne Bright, VP and head of social activation at Essence.
Mike Parker, global president of iCrossing, added that both hires come from backgrounds in two areas that are critical to Snap's growth: advertising and content.
"The caliber of people that they've brought in is very high — these are known qualities in our business," he said. "I take it as a positive [sign] to retool and bring in a group of people who are much more experienced and sophisticated at building an advertising business."
Khan wasn't involved in the day-to-day ad business as much as agencies would like
Snapchat is breaking up Khan's job into two roles that will serve different aspects of the business.
Agency sources like the idea of breaking up the role because they feel like they will get more attention with one person solely dedicated to advertisers. While Khan was involved in the advertising side of Snap's business, he pulled double duty as Spiegel's right-hand man and chief strategy officer.
That's caused advertisers to feel like they don't get the same service from Snap as they do from Facebook, Google, and Twitter that have dedicated go-to faces for advertisers.
Bright said getting Khan to attend industry events — like dinners at the yearly Consumer Electronics Show in Las Vegas — was often a struggle.
"He wasn't as involved in the day-to-day ad mechanics — it took a lot to get him at a CES dinner or other big, strategic meetings," she said. "I think it's really good to have someone who is more focused on the advertiser side who is able to drive a lot of that relationship building."
Snap's new execs are coming in to 'a decent amount of discontent'
While agencies welcome the new advertising hires, some say that the new hires will have a massive amount of work ahead of them to turn around Snap's perception. In recent months, a number of Snap execs have left and discontent within the company continues to grow, according to a survey obtained this week by Cheddar. According to the report, 40% of Snap's employees do not plan to stay at the company.
Those internal problems trickle down to advertisers, Bright said.
"They have room for improvement," she said. "There seems to be a decent amount of discontent, and we're seeing that on a day-to-day basis. For our large advertisers, we're still getting good service, but I think some of the tumultuousness of their company is more noticeable than others."
Advertisers want to see Snap's audience broaden
Specifically, the exec turnover has affected Snap's product with its controversial redesign. Advertisers continue to want to see that Snap can grow its monthly active users — a metric that will show that the app appeals to a broader base of consumers than teens. So far, Snap hasn't proved that it can do so, especially with more competition from Instagram and even teen-focused TikTok, several sources said.
"Honestly, Snap convos have been less prevalent these days, at least with our clients," said Tom Buontempo, president of ad agency Attention. "Instagram's aggressive push and connection to the Facebook ecosystem has been priority."
Bright said she was not convinced that Snap could gain the massive boost in monthly active users that it needs to compare itself to Twitter in terms of reach for advertisers.
"I have not yet seen anything that they've done or are planning to do that is really going to be driving significant changes in monthly active users," she said. "In order for them to get to the level of Twitter as an example, they need to get a little bit broader of an audience that they have now — and I'm not very optimistic that they will."
Snap's ad prices continue to drop — and that's a good thing
A bright spot in Snap's ad business is prices, as well as its innovation in augmented reality.
As Snap has built out its ad business, it has increasingly rolled out new tools like a self-serve platform and auction to allow advertisers — specifically small and mid-size businesses— to buy ads and manage campaigns.
ICrossing's Parker said that Snap has been effective in two crucial metrics in building the first stage of an ad business: Creating scale and getting people to engage with a platform.
"I don't look at Snap as unstable. Their audience is their audience [and] the advertising opportunity is the advertising opportunity," he said.
Despite all the internal turmoil, Bright said that Snap's ad products have been impressive for her retail clients going into the fourth quarter of the year, which traditionally is the biggest time of the year for ad spend.
"From a CPM basis, they are relatively inexpensive but also [metrics] like 'swipe-up' rate have been fairly good — not great but better than we'd expect for that sort of action," Bright said.
She added: "They are certainly the best innovators in the augmented reality space, which for super-big retailers is very cool, splashy and it's bringing consideration into whatever they're selling. I love it — that's not necessarily a short-term sort of thing but I can imagine that with a lot of retailers and e-commerce, Snap is going to continue to be a very important part of their plan moving into Q4."
Join the conversation about this story »
NOW WATCH: What activated charcoal actually does to your body