Why Snapchat CEO might be right about not wanting to expand the app in ‘poor countries’ like India and Spain?

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In a recent lawsuit against Snapchat’s parent company Snap Inc. at L.A. superior court, an ex-employee of Snapchat named Anthony Pompliano has alleged in a user growth meeting he attended in 2015 and expressed his concerns about not having enough overseas user growth, the Snapchat CEO Evan Spiegel said that he does not care about the expansion of the app in ‘poor countries’ like India and Spain.

And lo and behold, did people found another reason to be offended about. Another person to crucify to. And all of a sudden people in India making memes of Evan Spiegel and hurling abuses at him on twitter. Like they have nothing else to do with their lives.

Now, we are not saying that he said that and we also not implying that he didn’t say that. But in fact for the sake of our argument, we are going to assume that he almost certainly did make that controversial statement and analyse from there if the statement made could be from a business point of view or it came out of sheer arrogance of his.

Let’s start by breaking down the incident. It was some time in 2015 when the incident happened. The app in the centre of this controversy is Snapchat. And the person in question is the CEO of Snap Inc. The holding company of Snapchat app. Now, what are CEO’s do for a company? They are responsible for making decisions, that in turn not only make the company money but also take the company forward in growth and reach. CEO’s are not only responsible for making money, they are also responsible for saving it from where it is not needed.

Now, what are CEO’s do for a company? They are responsible for making decisions, that in turn not only make the company money but also take the company forward in growth and reach. CEO’s are not only responsible for making money, they are also responsible for saving it from where it is not needed.

Now let’s take a look at what is Snapchat’s business model. Snapchat works on sharing and viewing small 10 seconds long videos on the platform. You take a short 10 seconds long video or snap a photo, put a text message over it and share it with your friends privately or publicly with the world. Later they partnered with internet video content producers like Buzzfeed, Wired, TMZ and so on to bring those publishers content on Snapchat. They also allowed big publishers to share longer videos. But all of those publishers were based in the USA. And every aspect of using the app relies very heavily on using a lot of mobile data.

Now, we take look at India of 2015. The total population of India at that time, 1.3 Billion. Internet penetration in they country by the end of December 2015 is around 17% to 19% of the total population. And the number is somewhere around in the neighbourhood of 400 Millon people. 4G was at a crawling start in the country, 3G was far from reliable(and still is) and really expensive. So more than 70% of those people were still on 2G. So, that leaves us with some 100 million people who are on 3G and 4G . The people who can really use the app. But still, you have to remember the cost of data was still very high. And while watching videos for a mere 30 minute you could have burned through 500MBs of data easily. So that drastically cuts down the number of people who would want to use Snapchat even more. Because most people were recharging 1GB or lesser data packs back then because of the cost. And on top of everything, they would have to rent servers in India, hire a management team and spend millions on legal compliance in India. Now as Indians, we need to ask ourselves would a business looking to be profitable would enter a market where user base/demand is almost nonexistent or rather save the money and invest that back in your stronger markets!? For me, any sane person would go for the later option.

So, as a CEO you not only have to make the money for the company, you also have to stay away from bad investments. Otherwise, the board of directors and investors will throw you out of the company. And that is true for Snapchat CEO Evan Spiegel too. The Snapchat CEO must have had to stay away from erratic investments in the early days of the company.

And that’s the reason I believe if Snapchat CEO made the alleged remarks it was out of his knowledge of the situation and the knowledge of the bigger picture. Not out of arrogance.

Anyway, let us know what is your 2 cent on the matter in the comment section below.

 

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