May 2, 2018 · 6 minutes

“Snap is a camera company.”

I kept thinking of this phrase – Snap's chosen corporate tagline – while the company was reporting and discussing earnings. Landing on its investor relations site, the words stand out inside the spartan design. There was no mention of cameras in the earnings release, while the earnings call focused much more on ads than cameras. But if anything has become clear this week, it's that Snap is a camera company.

Here's an interesting bit of trivia about camera companies. 130 years ago, Kodak offered its first camera, marketing it with the slogan, “You press the button – we do the rest.” In January 2012, Kodak filed for bankruptcy court protection. Snap was founded four months before this happened, and you can't help but think there is a passing of a corporate baton somewhere in there. One camera company flees angry creditors, another is born to take its place.

Kodak has always been a camera company the way Gilette has been, famously, a razor company. Both really sold what went inside those devices. In that sense, Snap is a Kodak for the digital era – just swap out “film” with “ads.”

Yesterday, Snap had a kind of Kodak moment when it posted its earnings for the first quarter. The company lost $386 million – and that was the good news. That loss, at least, was in line with Wall Street expectations, while revenue was not. Snap saw revenue of $231 million, below the $245 million that analyst had forecast.

During a quarter when Snap unveiled a dramatic but poorly received redesign of the Snapchat app – the camera company's actual camera – growth in the user base also disappointed. Daily active users totaled 191 million, below the forecast 194 million. CEO Evan Spiegel said that figure declined in March. Recall that Kylie Jenner ignited a user rebellion against the redesigned app on February 28. Spiegel had downplayed such complaints at the time, but now Snap is paying the price: The stock fell as much as 22% today to $10.96, an all-time low.

"Snap is a poorly structured company that is demonstrating a clear pattern of mismanagement," an analyst at Piper Jaffray declared in a research note. This is the kind of insight more valuable before a terrible earnings report, and which afterwards seems just like piling on. Yes, Snap's revenue growth of 54% last quarter was down from the 72% growth rate a quarter ago. Yes, that rate will fall further this quarter, per Snap. But is it worth throwing the towel in on this company already?

For his part, Spiegel is largely sticking to the redesign, as well as the thinking that inspired it, although Snap is embarking on a redesign of the redesign. "Creating public-facing content is a very different behavior from interacting with close friends,” he said in the call discussing earnings, “which makes it challenging for both to exist successfully in the same ecosystem.”

Unlike Facebook, which shoveled public and private content together into the same timeline, with terrible consequences for society, Snap wanted to offer both kinds of content in the same app, only presented separately. Given the blowback Facebook had endured because of its timeline's click-rewarding algorithms, and given that Snap's previous quarter indicated a turnaround was taking root, Spiegel's more thoughtful approach on how to present content to users seemed like it was going to prevail.

That brings us to one of the crueler ironies of the current round of tech earnings. A week or so ago, it seemed like Facebook earnings would be hamstrung from the #deletefacebook campaign, while Snap earnings would show that the backlash from Snapchat's redesign was short-lived, as most redesign backlashes tend to be. After all, which matters more to users: abuse of their personal privacy, or bold tweaks to how they view social content?

We now know the answer. Bad privacy policies are much more tolerable than a clunky redesign, even more so for investors and advertisers. Facebook, the perennial bugbear to Snap's idealism, prevailed once again. Facebook's stock is basically flat over the past three months, during the worst controversy in its history, while Snap has lost 45% of its value because... because Kylie Jenner was displeased?

One thing about social media: It loves a compelling narrative. The Jenner tweet was followed by another from cosmetics brand Maybelline, which noted that its Snapchat views “have dropped dramatically” and asking if it should stay on the platform. Maybelline later deleted the tweet, but the narrative had hardened into a sizable speed bump between Snap and its vision.

“During the quarter, we had many conversations with our advertisers about the redesign,” Snap's chief strategy officer Imran Khan said in the earnings call. “These have been challenging conversations.” He continued,

At the end of the day, advertisers are rational. They want to advertise and they want to drive return on their ad spend. But at the same time, they're human. When there's a lot of negative news on the press every day, it does give people pause, it does influence people's buying decisions... that does come out on the conversation and become a disruption on the selling process.

I applaud Khan's effort to humanize advertisers, but the rational side of advertising only cares about user privacy insofar as it can be exploited. Snap, like Facebook, has chosen to make advertisers their customers. And whether Spiegel knows it or not, that choice undermines all the idealistic goals about serving users that he espouses. Spiegel wants it both ways. Zuckerberg talks like he wants it both ways too, but he knows he has only one master – the advertiser's vampiric bloodlust for user data – so everyone knows his rhetoric is as hollow as the husk of any soul that has been sold.

Snap remains a work in progress, one that happens to be regressing at the moment. The worrisome insight into its latest earnings report is that advertisers are retreating from it in favor of Facebook. But giving in to Zuckerberg's strategy – pull out the stops to say you're fighting for the user, while serving advertisers first and foremost – would be a mistake. It would simply make Snap a smaller Facebook, one maybe small enough to fit inside the treads on Zuckerberg's shoes.

No, Spiegel's idealism – assuming as I do that it's sincere – is Snap's best asset. It powers the company's innovations, even crazy ones like Spectacles 2.0 after the first version sold so poorly. It invites others to innovate through Lens Studio, and allows Snap to move into potentially lucrative areas like gaming with Snappables.

Meanwhile, Facebook's innovations these days are limited to either fixing the privacy messes it created along the way or mundane things like dating apps, which were innovative in 2013. To be sure, Snap is at a low point – in both its stock price and its public perception – but all of its innovations are geared toward something it's been dreaming about for some time: augmented reality. Apple, Faceboook, Google, and many others are pushing into AR, but none has AR embedded into its DNA the way Snap does.

All along, Snap knew that AR was the camera's future. Snap is, after all, a camera company. And that is what I believe will pull it through this dark hour.