Wednesday, Sep 7, 2022 • 44min
Box CEO Aaron Levie on Software Outlook, Snap CEO Evan Spiegel on Cost Cutting Plans & Previewing Apple’s New Product Launch 9/7/22
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Our anchors begin today’s show with New York Times Contributor and “Sway” podcast host Kara Swisher breaking down the latest action from Vox Media’s Code 2022 conference. Then, TPG Director David Trujillo weighs in on the broader landscape for media stocks, and cloud content management firm Box CEO Aaron Levie shares his outlook for the software sector. Next, Snap Co-Founder and CEO Evan Spiegel joins to discuss the social media platform’s restructuring plans, cost cutting measures and more. Later, CNBC’s Steve Kovach previews tonight’s new product reveal from Apple.
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Kara Swisher
Deirdre Bosa
Evan Spiegel
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Transcript
Verified
Carl Quintanilla
00:01
I'm Scott Wapner. When the Closing Bell rings, we're just getting started. Closing Bell over time is your destination for late-breaking news and after-hours action. We're tackling each trading day with actionable advice from some of the biggest names on the street. Follow and listen to
CNBC's
Closing Bell podcast today.Share
Deirdre Bosa
00:22
I'm Deirdre Bosa and you're listening to
CNBC's
TechCheck. Our show is live weekdays at 11 a. m. Eastern, listen in.Share
Carl Quintanilla
00:34
Good Wednesday morning. Welcome to TechCheck. I'm
Carl Quintanilla
here with John Ford and Deirdre Bosa, live from one of the biggest tech events of the year, Vox Media's
Code conference here in Los Angeles
.Share
00:44
Big lineup so far, including google
Sundar Pichai
, Mark Cuban
talking about the best and worst parts of big tech - we'll get more on those comments in a moment. And that's not all Tim Cook
speaking tonight the heels of that far out product event this afternoon, what it all could mean for the stock later this hour.Share
01:01
And as the tech volatility continues more from the C suite exclusives with the CEOs of
Box
and Snap
, joining us for a big show, John, one of our favorite times of the year.Share
John Ford
01:12
Yes, indeed. Looking forward to it. We've got to start today's feed with the tech tumble. The
NASDAQ
trying today to end Its longest losing streak since 2016.Share
01:21
As tech stocks across the board have taken a hit.
Apple
is down more than 6% over the last month, biggest drag on the NASDAQ
yesterday and Amazon
and Microsoft both down 10% or more. Even bellwethers like Salesforce
have erased pandemic gains now trading at levels last seen at the very beginning of the pandemic April 2020, Carl.Share
Carl Quintanilla
01:42
John as we said, big week for tech here at the Code conference, one of the big issues for investors of course, fears of a looming economic slowdown and cuts to corporate forecasts.
Share
01:51
The head of
Alphabet
Sundar Pichai
on stage with Kara Swisher
last night talked about the impact of higher costs, uncertainty and how he wants to make the company 20% more productive.Share
Sundar Pichai
02:01
There are a set of positive factors that are set of negative factors and there's inherent uncertainty in the economy. So that's the macroeconomic outlook and the macroeconomic performance is correlated to ad spend consumer spend and so on.
Share
02:15
And so we're not, you know, as a company, we get impacted by all that across everything we do, I think with scale you can, you can be slower to make decisions. You know, there are more people to approve things. So, you know, you look at it end to end And and figure out how to make the company 20% more productive.
Share
Carl Quintanilla
02:34
Let's bring in the aforementioned
Kara Swisher
and what she's calling her final at least Code as host. How do we how do we characterize that?Share
Kara Swisher
02:41
I've been doing something else, I've been doing something else, and just doing something else. I've done this for 20 years. We've had the most astonishing run Walt Mossberg and I started it many years ago as all things digital and I just feel 20 years is a good time to try something fresh and different.
Share
Carl Quintanilla
02:54
Well, you're definitely making a statement with the lineup this year. What are you trying to say? Because this lineup is insane.
Share
Kara Swisher
03:00
Yes, it is. But it has been over the many years. I mean we had gates and jobs together. We had jobs many times.
Elon Musk
has been here. Mark Zuckerberg
, not so good performance has been him, but we've always tried to sort of be of the moment. And one of the things I'm really trying for this time.Share
03:15
And I actually invited a lot of people I like, I've known as being tough on tech but I like
Sundar
. I like, I really, really like Evan Spiegel
. I really liked Tim Cook
.Share
03:25
And so, I want to talk about tough issues with them. But it's mostly people that don't drive me crazy.
Share
Deirdre Bosa
03:30
You've always had a really great lineup, but their collective market value at this point in time is in the trillions of dollars. And that was why it was interesting when you started with
Sundar
and he talked about making it 20% more efficient. The stakes are so much higher this year, especially where the market is.Share
Kara Swisher
03:44
Tech is coming out of this pandemic period where they soared - I talked about that many years ago - and now they're sort of, it's a reckoning and I don't mean a reckoning in that, oh no, kind of thing because there's still enormously powerful.
Share
03:56
So we really wanted to talk about where we go next. And I wanted to lean into the future rather than litigate a lot of things from the past. Although we had
Amy Klobuchar
, Senator Amy Klobuchar
here. She was talking about her legislation. I thought she did a tremendous interview.Share
04:09
Andy Jassy
is here. You know, I really, I have interviewed him before, but last time I did, he wasn't CEO, I have had a long relationship with him.Share
04:17
A lot of the people, I've had long, long relationships before they were trillion dollar company.
Share
Deirdre Bosa
04:21
Exactly. That's what I mean. And
Tim Cook
what a moment to get him. He's basically getting off the stage in Cupertino
, getting on an airplane and coming right here.Share
Carl Quintanilla
04:30
Like most of the tech media!
Share
Kara Swisher
04:31
Yeah. Yeah. I know it's interesting. One of the things I wanted to do there is, I'm not gonna ask a ton of questions about the products will be another
iPhone
next year. But one of the things I did is the very first speaker at Code 20 years ago was Steve Jobs
.Share
04:44
His legacy is really interesting to me and a lot of the stuff whether you like him or not, up and down, he's, you know, he's not a controversial figure, but now he seems enormously prescient in terms of what they're around privacy around all kinds of issues.
Share
04:58
And even though they face this enormous power,
Tim Cook
is built into a powerhouse that is getting regulatory scrutiny deserves, everybody deserves regulatory scrutiny.Share
05:07
And and I wanted to end talking, it's it's a trio of people actually it's not just him, it's Tim, Lorraine Powell Jobs, and
Jony Ive
this is these are the people who knew Steve Jobs
the best among the people and I wanted them to talk about his legacy, and where it's headed.Share
John Ford
05:24
Hey Karen, it's John good to see you albeit from a distance, you've often talked about what you do as live journalism. It's a it's a legacy moment - gotta talk legacy - what do you think is the legacy of All Things D and Code as events?
Share
Kara Swisher
05:42
Well, I think we did it at a time when nobody was doing it and a lot of those conferences walt and I used to go to them and be astonished by how terrible they were. And they were such sort of suck ups on stage, can I say that whatever I'm saying it?
Share
05:54
And so I thought they were not very well done. But you could do really incredible live journalism and one of the great things is really smart people as I've said over and over again, are able to handle tough questions.
Share
06:07
And I think a lot of the CEOs including
Steve Jobs
liked it because he got he got to tussle and it was fair and it was it wasn't snarky, I don't think we were particularly snarky but we were tough and they've been really some tough moments on stage. I think Sundar
are asked a lot of tough questions. I thought he handled himself great, and I think it's a relief to be able to do that well.Share
Deirdre Bosa
06:27
You, they keep coming back because they're tough, but they're also fair and that's always the balance.
Share
Kara Swisher
06:31
Well, someone said it was Stockholm syndrome. I don't know why they keep coming back, but you know, I've got, I'm doing some other things that are going to be a lot.
Share
Deirdre Bosa
06:38
Okay, well, let me ask you, I mean we have the mega caps, which we've talked about
Jassy
, Cook
, Sundar Pichai
, but there's this other level of CEO, a little bit of a smaller company that is going through a really difficult time right now, whether that be layoffs, whether that be evaluation reset, we're gonna have one of them on the show shortly. Exactly.Share
06:57
What lessons do you think they can learn?
Share
Kara Swisher
07:01
You know, it's interesting because
Snapchat
has been a really innovative company. Wonderful product. My kids use, still, they do not give it up. They will not use Facebook, they don't use Instagram
.Share
07:12
They do, in fact, they do. And so you know, what do you do when you have an amazing product and you're still facing headwinds that are economic doing very well for the last couple of quarters and now, you know, the economic macroeconomic situation is bad for a smaller company. So what do they do?
Share
07:26
And that also sort of dovetails with what
Amy Klobuchar
? How do you create competitiveness where the big ones - even though they're doing amazing things too - they're still huge and causing impact on everybody else. So I think, you know, I think Evan will give a great interview about what's going forward and then, and Andy Jassy
will too, because they're also facing unionization issues, the stock is way down, inflation, etcetera, etcetera. So I really, and work from home, there's all kinds of.Share
Carl Quintanilla
07:56
And you mentioned
Cook
speaking hours after the product event and you say there'll be a new phone next year, but there's been codes that have been about risks to tech and there's been codes that have been very aspirational about opportunities in tech. What do you think it's going to be? and could be emblematic of either one.Share
Kara Swisher
08:14
I think aspirational, what do we do now? Look, we understand the downsides to tech now, what can we do? One of the things we're doing the last day is on climate tech and I have
John Doerr
here with Ro Khanna
, we have the head of the E. P. A. But he's in Jackson because of the crisis there.Share
08:28
And you know, I what are we gonna do about big problems like climate tech? And so the entire third day is about startups and alternative energy bill gross talking. But a lot of startups that are trying to solve these problems.
Share
08:40
And that's what I really want to lean into going forward. These kind of things. What can tech do? That's good. What can they do that helps? We had the
Moderna
Chairman talk about where we're going with mRNA
technology using digital means. And so I want to talk about I'm not going to be sunny, you know - not me, I'm not sunny - but there's a lot of things these people can do that, the richest people in the world, the most powerful and they can help solve some problems.Share
09:02
I thought
Mark Cuban
talked about that rather eloquently yesterday he's doing cost-plus drugs, which is fantastic.Share
Deirdre Bosa
09:09
Going back to this idea though, that the Apples and the Amazons of the world are in a different position, are you going to press
Tim Cook
on that advertising push that he is doing right now? Embarking on while sort of upending the landscape. Some are calling that opportunistic critics are calling it hypocritical. What do you think? Where do you stand?Share
Kara Swisher
09:26
You know, I don't love that
Tim Cook
is our national regulator of privacy, but they're doing the right thing. There are 100% doing the right thing. The question is do we want a company to be monitoring, you know, the Facebooks, our privacy and Googles of the world or do we want the government to do it?Share
09:43
I think directionally correct. I don't love that. It's, and I don't think he loves it. I don't think he loves it, but that's very in keeping it doesn't matter if it's opportunistic.
Share
Deirdre Bosa
09:49
It doesn't matter, but he's going into advertising, it's creating an opportunity.
Share
Kara Swisher
09:52
Yes, but, but maybe he can do advertising in a way that's not quite as rapacious as it's been. Like, perhaps, and I suspect they will. And that was sort of another legacy of
Steve Jobs
. He talked very clearly about in plain English.Share
10:06
They've got lots of problems china and there's all kinds of things around
Apple
, but privacy isn't one of them.Share
John Ford
10:10
So what do you think is gonna happen Kara with the workforce in Silicon Valley, which has had a lot of leverage over the past few years, probably will continue to have a lot of leverage, but perhaps less, there's this return to work push. There's a perhaps weakening labor market will certainly loosen if we head into recession. Are there lessons here from the past that one draws from?
Share
Kara Swisher
10:37
Well, there's been ups and downs John, you and I have covered this for two decades, right, 2.5 decades. And I think that that there is some leverage because it's not the leverage that I'm gonna go somewhere else because I do think there's gonna be layoffs all over the place. And people would be sort of shocked. It's happened before: 2008, 2001.
Share
10:55
But what I do think is there's been a real rethinking of where you work from and so the companies, all companies are going to have to be flexible around remote work and I'm not sure what the answer is. Because hybrid is difficult. It has to be intentional. People have to be there at the same time instead of just showing up the office and you're the only person there and I did that the other day.
Share
11:13
And I think it's really, it's a real time to rethink productivity and people's lives. And again, that also goes in with childcare and all the ways we want to live commuting, transportation, and we have people to judge here to talk about what he's going to do about the money, he's got to spend transportation.
Share
Carl Quintanilla
11:30
Finally, when you think about Code's legacy and when you were starting it out, have you surprised even yourself in terms of what it's become?
Share
Kara Swisher
11:38
No, no, and Carl, it's not over world domination is next domination is complete, and that world domination.
Share
Deirdre Bosa
11:48
Aviators aren't always right...
Share
Kara Swisher
11:50
It scares people. We'ere giving them away here, real ones! Real ones, not cheap ones.
Share
11:55
By the way, I can't believe
Ray-Ban
is partnering with Facebook and not Kara Swisher
, but that's okay. Whatever.Share
Carl Quintanilla
12:01
We look forward to seeing you all day long thanks a lot.
Share
Kara Swisher
12:03
You will.
Share
Carl Quintanilla
12:04
Kara Swisher thank you.
Share
Deirdre Bosa
12:06
And TechCheck is just getting started here at Code, we're gonna have more on the big tech trade with
TPG
, David Trujillo
. We will talk the outlook with boxes, Aaron Levie
of that stock outperforms and that is not all. We also have an exclusive with Snap's
Evan Spiegel
as he speaks right here at Code with Cara. A huge show ahead, do not go anywhere.Share
Break
Carl Quintanilla
13:06
Twitter
shares popping a little more than 4% after a Delaware court denied Elon Musk's
request to delay the trial with Twitter
about whether he'll be forced to consummate the transaction to buy the company. So that's still on scheduled to start in mid-October on the 17th.Share
13:22
Sundar Pichai said here at Code, get the popcorn ready. That's sort of the general view, right, that the fireworks are coming.
Share
Deirdre Bosa
13:27
Yeah, certainly you get a little bit. You give up a little bit. So that will be definitely one to watch with popcorn.
Share
13:32
Let's keep the conversation going and let's talk to a major investor in growth tech. We're joined now by our very own Julia Boorstin as well with
TPG's
David Trujillo
who leads the firm's investments across internet media and communications. Early investor in Airbnb,
Spotify
and Uber
and on the board of Uber
and DirecTV
.Share
13:50
David, it's great to have you here.
Share
David Trujillo
13:52
Thank you.
Share
Deirdre Bosa
13:52
Obviously market have taken the leg lower, especially tech over the last few weeks since Jackson Hole. You guys have nearly $40 billion in dry powder. How are you seeing the market opportunity right now and have valuations come down enough?
Share
David Trujillo
14:04
Yeah. You know, I think we've seen in the public markets this reset in terms of valuations, and I think the big pivot, and you're starting to hear it in the conference it sounds like as well, is the move from growth at all costs, to actually need to focus on profitability.
Share
14:18
We're definitely seeing that play through in the private markets as well. I'd say one theme we're seeing is a lot of founders and management teams that built their businesses over the past decade in this inexorable up environment are having to pivot to focus on profitability and looking for help from investors like us in doing so.
Share
Kara Swisher
14:35
And we're seeing on hearing a lot about that. I mean we have
Evan Spiegel
on they just did that restructuring. I'm curious if you're looking at growth opportunities right now, which sectors or areas do you think have the most potential upside?Share
David Trujillo
14:47
Yeah. You know, I think, you know, we have invested a lot of consumer-oriented tech companies during the pandemic that saw a lot of big tailwind, so think of
Calm
and direct to consumer, the mindfulness meditation app, IPTC and e-commerce, we had a broad band play and just everybody at home and use of bandwidth, and we have a lot investments in entertainment: so think of CIA, DirecTv,
entertainment partners that really benefited from people staying at home and streaming.Share
15:14
I think post-pandemic, you're seeing a reset in terms of growth rates, because a lot of that demand got pulled forward, but these are still really healthy, and markets and sectors that we believe in long term.
Share
15:24
I think another kind of deal type we're seeing in this environment is trying to be not correlated to the market. And what I mean by that is doing problem-solving deals. So one of the big deals we did last year was a carve-out in partnership with
AT&T
of DirecTV
. Super complicated deal had been totally integrated within AT&T. I think we had over 200 transition services agreements.Share
15:46
And that's just not something, you know, any investor can take on, and so looking for those non correlated deal types.
Share
Kara Swisher
15:53
Yeah, I mean I want to get your thoughts and more of the tech market right now. But you just mentioned the media space. Obviously there's been so much going on right now: concerns about a contraction in the streaming market with those
Netflix
numbers down.Share
16:04
What is the outlook that you have in terms of the opportunity, do you think that we're going to see everyone shift over to these ad-supported services?
Share
David Trujillo
16:12
Yes, certainly you're going to see a part of the population focus on lower expensive - particularly in this economic environment - streaming alternatives.
Share
16:20
That being said, you know, notwithstanding the news at
Netflix
and Warner Brothers Discovery
needed to focus on cost out at the moment.Share
16:26
Content spend is still an extra... it's really high, while the second derivative, while that growth rate may be slowing - relative to any historical benchmark - people are still spending a ton on content production. We're seeing that flow through our own portfolio.
Share
Carl Quintanilla
16:39
And so it's... I mean we always say it's like the end of Reservoir Dogs, where nobody wants to put the gun down right? You expect somebody to put the gun down, in terms of content?
Share
David Trujillo
16:47
And I'll tell you, we're not seeing it yet. Well, the growth rates may slow, we're still in this content, or that we're seeing play-through in terms of spend.
Share
Deirdre Bosa
16:55
So then how are you looking at your own investments? Like I mentioned, you got $40 billion dollars in dry powder. Are you looking to put that to work right now? Do you believe the markets bottomed earlier this year or is there more to go?
Share
David Trujillo
17:04
You know, unfortunately, don't have a crystal ball for the public markets. But I'll tell you in the private market, you know, you generally see about a 6 to 9 month lag. And I'd say some of the deal types we're seeing now are companies coming to us because they know the IPO market shut they still need primary some cases secondary financing were a great source of liquidity.
Share
17:21
There's other companies that just been built with too high of a burn rate. They just need to raise capital.
Share
17:26
And I think the other interesting thing is, you know, public markets can reset you know on a daily by-the-minute basis and so you get to a price that settles out. In the private markets, there's still a need for liquidity. And so we're starting to see a lot secondary sales of big private tech companies at meaningful discounts to the last private round.
Share
Kara Swisher
17:43
And how do you think that's going to continue? I mean right now we're seeing this disconnect we're seeing down rounds and but there is still this inflation of the private market versus the public market, and the IPO window hasn't really opened up yet.
Share
David Trujillo
17:55
Yeah, I think look there's always that lag that described usually 6 to 9 months. And frankly for companies that raised in 2021 they're VCs are telling them, "Use that capital, do not raise because you're not going to like the outcome."
Share
18:07
That being said, when you think of the over 1000 private unicorns just in that huge denominator in huge TAM, there's a lot of opportunities for us and others.
Share
Deirdre Bosa
18:16
So do you think there's a shake out, especially over the last few years, we saw so many enterprise software companies go public. Was it too many? Do you think that's consolidation? Like where you guys exactly looking for opportunity? Is that that consumer tech space that have traditionally been in or is there opportunity in the enterprise space?
Share
David Trujillo
18:32
There's definitely opportunity in the enterprise space. In fact, you know, as I mentioned, you know the IPO market shut you have companies looking for liquidity. Similarly there're public companies that are realizing it's not so great always being public, and not liking where they're trading, and starting to think and there's a lot of rumored activity around public to private, particularly enterprise related businesses.
Share
Kara Swisher
18:51
But so much of your business is also about these consumer-facing companies. I mean you're an investor in
Spotify
, now you're on the board of Uber
as well, and there is this question about how well the consumer and consumer spending is going to hold up in light of concerns of a recession and all these inflationary issues. What's your outlook?Share
David Trujillo
19:08
Yeah. I'll tell you the data we're seeing come through the portfolio.
Share
19:11
I would say on the direct to consumer we are seeing some signs of weakening, where it's like early signs of churn rates and subscription businesses. You're starting to see that.
Share
19:21
Interestingly on the enterprise side, things continue to be pretty strong and we're not seeing that flow through the enterprise businesses. But with consumers being 2/3 of the US economy, one would expect to see a little bit of those headwinds starting in the enterprise later on this year.
Share
Deirdre Bosa
19:34
Yeah, I think you're already starting to see them. We've talked to a number of CEOs over the last week or so who talked about those lengthening sales cycles, so we'll see what the back half of the year brings. David, thank you so much for being with us.
David Trujillo
, TPG
partner. John over to you.Share
John Ford
19:47
Yeah, thanks. We're gonna stick with enterprise. Go to
Box
. It is off, it's August highs but still outperforming its peers and the broader software sector. Only down about 2% year to date. Joining us now. Box
co founder and CEO Aaron Levie
, how about that? Outperforming.Share
Aaron Levie
20:03
By staying flat.
Share
John Ford
20:05
Well the world has changed. The hype cycle missed you but so has the majority of this of this crater, tell me about demand. What are you doing in
New York
? Usually when I see soft guys in New York
doing deals.Share
Aaron Levie
20:18
We, we certainly have a lot of customers out here and there's also an investor conference, so a lot of stuff going on. It's great to be in
New York
, certainly things are kind of feel back to normal.Share
20:29
But overall I think you know the software market is certainly a dynamic environment right now, you know, there are various pressures happening around the industry. What our focus has been at
Box
is helping customers with, you know, saving money, automating their business, securing their data. And and that still has some, some really strong tail winds associated with it. So we're, you know, really kind of working through this environment in that way.Share
John Ford
20:51
Breakdown free boxes, sweets strategy and larger deals. Because it's very different from how you started out, kind of the freemium pick off the enterprise customers one at a time and sneak into the enterprise. Now you're like kicking the doors open.
Share
Aaron Levie
21:05
We're certainly a very different company than in those early days, but our whole strategies, we help companies manage their most important information: so this could be their financial data, their contracts, their marketing assets, their new product designs, and we want to help ensure customers can protect that data, be able to drive workflows around and collaborate on it, get e-signatures on contracts.
Share
21:25
So anything you wanna be able to do with your content, our platform is built for that. So we are now a multi product platform, building out a complete content cloud to help customers with their most important information.
Share
21:35
We have a multi-product selling strategy in the form of sweets, that let our customers really kind of get access to all of that technology all at once.
Share
John Ford
21:42
How much of that is industry and vertical driven versus just going out saying, "hey, we've got this horizontal net sweet basket of things for you to consume"?
Share
Aaron Levie
21:52
So I think our technology is very horizontal, so what we, what we get really good at is building a core platform and then we help tailor that platform in the way that we implement it, the way we bring it to market, in some cases with key partners. So in banking and financial services will help our clients with things like online wealth management for their their customers, working on collaboration around those that that set of documents.
Share
22:14
In media entertainment will help with the collaboration of media content in the federal government will help with, you know, citizen engagement and collaborating on mission critical projects that deal with a lot of documents. So on an industry basis we get more tailored, but the core platform is fully horizontal.
Share
John Ford
22:29
All that gray hair came over the past five years or so. So I want to talk about how the pressure that you were under a year plus ago, similar to the pressure that a lot of other software names are under right now.
Share
22:40
You dealt with an activist, you've changed some things in your strategy. Now that you've had some distance from it, hopefully spent some time on the beach as well as working. What are the lessons most relevant to the environment that we're in right now?
Share
Aaron Levie
22:52
And I think it's a great point, activists certainly are a great way to get gray hair but...
Share
22:56
We have, you know, it was for us, it was an experience where we were already driving towards growth and profitability and the activists sort of showed up, you know, as a part of that process and we decided to double down even further on the profitability side of the story.
Share
23:10
So the past 2-3 years we have worked aggressively to ensure that our business is really built for the long-run balancing both growth and profitability.
Share
John Ford
23:18
But how mechanically? Because there are a lot of people are having to say that now right, because either they're private and they're not going to get new capital in any time soon or their public and they're like, "Okay, the deals are getting smaller, they're getting you know, the closing of the deal is getting pushed out, we gotta conserve."
Share
23:32
So practically speaking was at a headcount thing mostly. What did you do?
Share
Aaron Levie
23:37
Yeah, well there are entire books written on just this topic. So just to give you a couple of the quick tidbits.
Share
23:41
I mean, first of all you have to start to look at where are you driving your business most efficiently? What markets are you in that are working what markets maybe do you need to pull out of? What parts of your product should you double down in where should you maybe drive reinvestment? You know what parts of your marketing go to market programs are working most effectively?
Share
23:57
So we had to look exhaustively across the business, this is going back to years ago to ensure that we were doubling down in the areas that were most profitable, that were growing fastest that we could drive most efficiently, and we put our resources really behind those initiatives.
Share
24:10
We worked aggressively on things like our infrastructure spend. So how do we make sure that we're improving our gross margins? How do we make sure that we're driving again the most amount of operational excellence across the business and ultimately that's led to now 20-plus percent operating margins throughout this year.
Share
John Ford
24:24
How are you approaching M&A right now?
Share
Aaron Levie
24:26
We're super selective. Our focus is we have a multiyear product roadmap that is all about ensuring that we are building the best platform for managing content in the cloud and occasionally if we can accelerate our roadmap through tuck in acquisitions that are done in a very judicious way, we will do acquisitions where we can tuck in that technology and accelerate our product strategy.
Share
John Ford
24:46
What are you looking for though? Is it product fit primarily? Are you looking for customer base and international access when you look at prospects?
Share
Aaron Levie
24:56
Highly focused on the technology and the talent. So we are religiously focused on building the best platform for content, which means that we have to be very selective of the external technology that we bring in incorporate in that platform.
Share
25:09
And so we are all about the tech and the talent that we're bringing on. And that allows us to actually be even more selective and surgical in the kind of acquisitions that we pursue.
Share
John Ford
25:18
Great to see you.
Share
Aaron Levie
25:19
Good to see you, John.
Share
John Ford
25:19
In person. Here at the
NASDAQ
, Aaron Levie
, the co-founder and CEO of Box
. Guys back to you.Share
Carl Quintanilla
25:26
All right, John still a lot more from Code. Still ahead
Andy Jassy
today, Tim Cook
, Bob Iger among the names that will be speaking. And that's not all Snap's
Evan Spiegel
will be in the red chair, but he's going to join us right here on set, next, when TechCheck is back in a moment.Share
Break
Kara Swisher
26:04
Welcome back to TechCheck. It's been a busy few weeks for
Snap:
a restructuring, sweeping layoffs, scrapping projects and two key executives heading to Netflix.
Snap
co-founder and CEO Evan Spiegel
joins us now in a CNBC
exclusive. Evan, Thanks for being with us here today.Share
Evan Spiegel
26:18
Thank you so much for having me.
Share
Kara Swisher
26:20
So Evan, there's so much ground to cover. But I actually want to start off asking you about a different app that everyone here at Code is talking about. And that is
TikTok
, my question for you is the restructure, you did all the changes you're making. How much of that is due to competition?Share
Evan Spiegel
26:35
It's really hard to disentangle, you know, the competition that's happening because the overall pool of ad dollars is declining from the platform policy changes from the very challenging macroeconomic environment, where you know the cost of capital is just exploded. So people are really focused on earnings.
Share
26:50
And digital advertising is easy to turn off quickly. So well I think digital advertising is going to play a key role in the recovery. I don't know when that will begin. And so we to really refocus our business and prepare for an uncertain macroeconomic environment, and we believe the companies that are going to be most successful through this period are ones that can really demonstrate and grow profitability.
Share
Kara Swisher
27:08
Yeah, I know you're really focused on profitability right now. But I also know you are a close watcher of different economic signals as you try to anticipate what's going to happen in the ad market. What are the signals you're watching right now and what's your outlook for the rest of the year?
Share
Evan Spiegel
27:21
Well, advertising is a really interesting business because it really represents a cross-section of the global economy. And I think one of the things we're paying a lot of attention to is the Fed funds rate relative to CPI, and if you look today it looks like we still have a long way to go. I mean we're negative 7% or so on that indicator. And that means that you know overall monetary policy is still very accommodative.
Share
27:42
And so when you hear
Chair Powell
say, you know, looking forward that they really think that they need to raise rates and get inflation under control and to expect pain looking forward. You know, we're listening and we're making the necessary changes to be able to emerge from this period of time, you know, in a much stronger position.Share
Carl Quintanilla
27:56
That's fascinating. I mean, we're gonna hear from him again tomorrow and we'll see how much he echoes from Jackson Hole. But I mean,
Powell's
comments are actually ringing in the hallways of C suite? That's that doesn't happen all the time.Share
Evan Spiegel
28:08
Well, I think when you have inflation running this hot people know that the paths forward are really difficult. I mean, you don't have to look very far. This in the 1970s, the 80s, these were really challenging periods of time in our country. In the 70s we kind of took the stop-start approach. In the 80s
Volcker
rip the band-aid by focusing you know, really on money supply and having rates be the output, so they went to 18% or something like that.Share
28:29
And so I think looking at, you know, of course inflation today, the energy shock, you know, food prices, this is a really challenging time for the world where fortune in the United States that you know, really have our own energy supply. But, you know, we're concerned about the environment, looking forward.
Share
Deirdre Bosa
28:43
To good economics background. You don't hear CEOs about the macro like that. I want to get a little bit more micro, again. Last night here at Code
Alphabet
Sundar Pichai, he talked about this idea that competition could come from anywhere.Share
28:56
Julie asked you about
TikTok
, I want to ask you about another app. That is BeReal
. That's gaining traction with a younger demographic. First, are you on it?Share
Evan Spiegel
29:04
I'm not.
Share
Deirdre Bosa
29:05
Second then it's like the anti-Instagram, right? It asked users to take a picture. An authentic picture at a random time, random time every day. Is that an indication you think that people are getting tired of the curated
Instagram
, TikTok
posts. And is that an opportunity for you guys?Share
Evan Spiegel
29:22
People were exhaust by that 11 years ago when we started working on
Snapchat
. Now there's nearly 350 million people every single day using our service because they want to express themselves without fear of judgment. So I do think this has been an enormous trend over the past decade or so. And it's I think it's set to continue.Share
Deirdre Bosa
29:38
Do you think
BeReal
has legs could eat into your demographic or you're not worried about it as competition?Share
Evan Spiegel
29:42
You know, I think what's really important is we look at
Snapchat
in our future is that other apps don't have to fail for us to be successful. And so as we've really focused on messaging, visual communication between friends and family. That's, you know, really the value that we provide to people's lives.Share
29:56
And of course we continue to innovate and add things like our map, where you can see what your friends are up, to our AR platform where 250 million people are engaging with. They are every single day. So I think, you know, we started with this core of visual communication and then we've evolved our service over time to diversify engagement and ensure that we remain competitive.
Share
John Ford
30:13
Hey, Evan, it's John back in
New York
. I'm curious about this mysterious perhaps this magic 20% number, Sundar
at Alphabet
wants 20% more productivity. You're cutting 20% of the workforce that was just taking you back to early last year's level. Shopify,
Peloton
both seem to have been caught up in this pandemic head fake.Share
30:35
What's the nature of this economic head fake that has caused so many companies to have to recalibrate. What did you think was happening versus what you have now realized is happening?
Share
Evan Spiegel
30:49
Well, if you look at the beginning of the year prior to the invasion of
Ukraine
, our revenue was growing approximately 44% year over year. You know, following the invasion. We saw energy prices skyrocket, we've seen a lot of pressure on food prices and people now believe that inflation is going to be higher for longer.Share
31:06
And, and as a result, obviously the Feds responding, they're raising interest rates and that means the cost of capital has increased. And there's a lot of focus now on earnings and cash flow. And so businesses are responding by obviously, you know, changing their cost structure.
Share
31:20
And for us, we wanted to make sure, you know, because we're so focused on, you know, building our business over the long term and really serving our community. We wanted to make sure we could generate cash, even an environment where, you know, our revenue didn't grow or, you know, even grew at a negative rate.
Share
31:34
So I think for us obviously these changes are very difficult. They are painful, but they're all about ensuring our long-term success, really in a volatile and constantly changing economic environment.
Share
Kara Swisher
31:44
And I want to hear more about that revenue growth though, you've been incredibly transparent about the slowing level of revenue growth you've seen starting with what happened the beginning of the year, very strong revenue growth and it really started to decline with the invasion in
Ukraine
. And you've been giving very frequent updates on that.Share
31:58
Growth slowed to a total halt in July. And you gave that update during your earnings. But since and growth is clearly picked up again based on the last numbers you gave. Do you expect that growth to continue to accelerate going into the fall?
Share
Evan Spiegel
32:11
It's just so hard to tell given how volatile the environment spend. And so that's why we just decided to give updates, you know, and let our investors know what we're seeing. We came out early in May and let people know that we were going to come in under our guidance.
Share
32:22
We thought it was important for investors to know. I came and told him in person at an investor conference and you know, then in earnings, we said, "We don't know what the quarter is going to look like, but we'll tell you what we see quarter to date".
Share
32:30
And you know, we just, We shared that revenue quarter today has been growing about 8%. And so, you know, obviously on an absolute basis, it's a big difference from the 44% that we saw at the beginning of the year, but on a relative basis if we look at our revenue, you know, last quarter we grew faster than Meta, Pinterest, Twitter or YouTube.
Share
32:47
So I think, you know, our company continues to be competitive, but it's a very, very challenging environment and we need to make sure we're successful, no matter what happens.
Share
Kara Swisher
32:55
But to tie that back to the question about the layoffs and needing to make sure your success. One reason
Snap
has been able to grow is because you've been an innovator, you've been an experiment experimental with all these different things, whether it's the hardware, or the spectacles, or the pixie, the flying drone camera...Share
33:09
You've really been trying all these different things, many of which you've now shut down. Is it going to be hard to innovate and iterate when you're trying to get rid of the things that were sort of secondary to your core business?
Share
Evan Spiegel
33:22
When you're innovating and experimenting, you know, you should expect failure. And some of the projects that we've invested in and some of the projects were really excited about either don't contribute to our three strategic priorities of growing our community growing revenue and
augmented reality
. Or their low margin like Pixie, which is a great product, but isn't going to contribute to earnings in the way that we need in this environment.Share
33:40
So it's always hard to make those tough decisions. We poured our hearts into these products and experiments.
Share
33:45
You know, innovation is about taking risks and sometimes that means really consolidating on the things that we see are working like
augmented reality
, which as I mentioned to hunt 50 million people engage with every single day.Share
Kara Swisher
33:55
And that's clearly a priority. But are you concerned about maintaining a culture of innovation at a time when you're doing layoffs and everyone is trying to retrench and focus on what's most essential to revenue right now?
Share
Evan Spiegel
34:04
Generally what we've seen historically is actually those constraints support innovation. And so people, you know, sometimes when things are growing very quickly, we're hiring lots of people, people tend to almost solve problems by hiring rather than innovating, right?
Share
34:17
And so sometimes constraints can be very clarifying and what we Seen historically in the past through our business through ups and downs? Is that those constraints push us to innovate faster and really serve our community of nearly 350 million people.
Share
Carl Quintanilla
34:30
What's the best way to communicate that the things you have to give up, right, to be profitable to convince your workforce that you're looking through a cycle? How do they absorb that? Do you think this point about how do you fight the notion that they're not growing or they're not spending and hence maybe I'll look somewhere else?
Share
Evan Spiegel
34:48
Well, I don't think it's ever easy to to shut down projects, especially because, you know, when we innovate, we put so much creativity and love and care and into these products, because we're really trying to delight and surprise, you know, our community.
Share
35:01
So there's never an easy way to to shut projects down. I mean I still feel the pain of shutting down Future Freshman, which was the company bobby and I worked on before Snapchat. But what I think is very important is that our team really clearly understands the path forward to re-accelerating our revenue growth and you know, continued growth in our community.
Share
35:17
We grew our community 18% year over year last quarter. And so as we continue to innovate and see that community growth that expands our long-term opportunity, which is something that's very important to us.
Share
Deirdre Bosa
35:26
And speaking of that revenue growth, I mean, traditionally you've been ad-based, but you're looking towards a subscription model with
Snapchat
Plus care Swisher
told us her kids are paying for it. You guys actually had a million users, right, paying for that within the first six weeks. Can you update that for us? Is there any fresh number you have, and that's 1% of your user base, what do you think that gets up to?Share
Evan Spiegel
35:47
Oh my gosh, it's so, so early to say, but it's really exciting to see the momentum around that product, over one million paying subscribers. And what I think is so exciting about the
Snapchat
Plus subscription services that it really aligns what we love to do, which is innovating for our community with our monetization model because our community pays you a little bit more for some new features $3,99 a month.Share
36:08
So we'll see where it goes. We've been dropping new products and features for Snapchat Plus on a regular basis, and we think that's going to be an important part about continuing to grow our subscriber base.
Share
Kara Swisher
36:16
Another thing you've been focused on is
augmented reality
needs to be shopping and integrating augmented reality
into shopping features, which is of course hopeful for your advertisers. We just got headlines yesterday that Instagram
is going to be dropping some of its shopping initiatives.Share
36:30
Is that surprising to you? Are you planning anything similar and what does this all mean for competition with
Instagram,
and Meta
?Share
Evan Spiegel
36:37
It's not surprising to me because people have really struggled to differentiate e-commerce. That's why we're so excited about using
augmented reality
to help people try on new products and shop in a differentiated way. And what's so exciting about our AR enterprise offering is that we take those products and features, we bundle them up and then we offer them to merchants to integrate with their website and their application.Share
36:57
For example,
Puma
just integrated camera kit into their application to allow people to try on their products. And what we see is that people, you know, of course increase conversion because when you can see yourself wearing something, of course it makes you more excited to buy. And we reduce returns, which is obviously better for the merchant because they save costs, which is so important in this environment.Share
37:15
And you know, it's also better for the planet, because we're not shipping stuff around as much. So that's, that's an area where we're really focused on investing. We just hired an amazing new leader Jill Pavelka to lead our AR enterprise initiative, and so we're really excited to see you know what, that team will deliver.
Share
Kara Swisher
37:29
A lot of big changes. We do really appreciate the frequent updates on revenue growth, so please keep it up. Yeah, the transparency is great.
Evan Spiegel
, thanks so much for joining us on the heels of that big restructuring and those layoffs, we really appreciate it.Share
Evan Spiegel
37:40
Thanks so much for having me.
Share
John Ford
37:42
Yeah, great to have him. Meanwhile, "it's hard to be lean and mean", that's according to
Mark Cuban
more on what he's calling the Amazon
opportunity. Next don't go away, we'll be right back.Share
Mark Cuban
38:04
I look at
Amazon
and I say their margin is my opportunity.Share
38:08
Hm. Meaning? Explain it.
Share
Mark Cuban
38:09
That they're a big company and in healthcare, particularly with medications, it's hard to be lean on mean.
Share
Carl Quintanilla
38:19
That's
Mark Cuban
a Code last night. The cost plus drugs co founder weighing in on the farmer space discussing Amazon's
plans to require one medical. John, he did sound certainly relative to crypto pretty enthusiastic about his ability to use Amazon's
margins for example, as leverage.Share
38:37
Even saying he was inspired by
Martin Shkreli
if he's able to manipulate pricing in the space that way he thinks maybe he's got a shot as well.Share
John Ford
38:45
Yeah, fun that he used that old Bazos's line against
Amazon,
at least in that case. But I don't get the feeling that any of these players is ready to scale yet in tech-driven healthcare necessarily. Like they've got good ideas. It feels like they're learning versus getting ready to ramp things up. I wonder when that moment will come.Share
Deirdre Bosa
39:07
There could be a lot of learning. We've talked about this before, John healthcare is a very, very difficult space. There's been others that have tried and failed. And you know, not everything
Apple
or Amazon
touches is gold. Remember grocery, we don't talk about it quite as much, but it's still really trying to make it done in that space. So we'll see how healthcare goes of course.Share
39:24
Guys, they had haven that joint venture with JPM and
Berkshire Hathaway
, which they closed up like Cuban's point that they have a million and a half employees that they can test this on, try it out with, that is interesting.Share
39:35
Meanwhile guys still lots more today.
Apple's
highly anticipated far out product event that's kicking off this afternoon. We will break down what it means for the stock. After the break CheckTech is back two.Share
John Ford
39:54
We are less than two hours away from
Apple's
far out product event Steve Kovach live from Cupertino,
with more. Steve?Share
Steve Kovach
40:03
Hey there, John yeah, this is
Apple's
first in-person iPhone
lodge event since the pandemic began.Share
40:07
You can see behind me the presses milling about there in the
Steve Jobs
theater, where it's going to take place in just about an hour or so. So here's what we're expecting John. Four new iPhones to quote "regular iphones", and then two of the more expensive Pro models and then some accessories, new Apple Watches, new AirPods.Share
40:23
But what investors really need to look for John is any price increases. There have been some rumblings over the last couple of weeks, there's gonna be a price increase across the
iPhone
lineup and also this event is happening in a week earlier than it normally does so that this current quarter that we're in is going to get a little bit more iPhone
sales than it normally does.Share
40:43
And then finally what investors should watch the
iPhone
rumored iPhone
hardware subscription program. The idea behind that, of course, you pay a monthly or annual fee and you get a new iPhone
every year coupled with all those digital Apple Services. Guys will send it back to you.Share
Deirdre Bosa
40:59
Yeah. And then we're gonna get cooked again down here. So it'll be a busy day Steve. Thank you. Thanks for holding down the fort in
Cupertino
.Share
41:06
Cara says she's going to talk more about some of the macro issues, Carl, but let's talk trading right.
Apple
makes up such a big proportion of the market in the three months leading up to this event historically, Apple
outperforms. But now we're entering a period where it historically has lulled. So I don't know. What do we got to hear from Cook
to maybe change that trajectory? We're not expecting fireworks today.Share
Carl Quintanilla
41:26
John the seasonal patterns around
Apple
events are pretty decisive.Share
John Ford
41:31
Yeah. Got to ignore the seasonal patterns because bottom line for the past decade, more years than not, people have said, "Oh well the
iPhone
this year is gonna be evolutionary. Not revolutionary".Share
41:41
Obviously it's been revolutionary. Look at
Apple's
stock, right? So it's a huge failure of analysis that people have thought year after year, the iPhone
is no big deal.Share
41:50
Watch the loyalty or watch the replacement rate, certainly watch the deals that
Apple
has in place. But don't expect anything that Tim Cook
says to immediately impact the stock, because people tend to sell the news and then look dumb a little bit later, I say. Well, we'll see.Share
42:09
NASDAQ showing signs of life this morning up now more than a percent.
Share
42:12
TechCheck back in a moment.
Share
Carl Quintanilla
42:27
One more thing today and that is
Netflix
and cost cuts, The Journal
reporting this morning. How the streamers looking to tighten the belt including potentially reining in its cloud costs with longtime partner Aws cutting down on copies of data and contents.Share
42:40
Pretty interesting in light of what
Snap
and Alphabet
has said about cost cuts. The hiring more interns and recent college grads, than relying on experienced employees. Less swag, fewer perks even shutting some offices in Salt Lake.Share
Deirdre Bosa
42:53
I'm really fun focused on that cloud piece of it as I'm sure John is too, because this was sort of the fear for the market was that cloud spending would cut back. You'd see a deceleration in those units at Amazon, Microsoft and Google, and that would get markets even more nervous.
Share
43:07
I would also note John that it's not just
Netflix
that is saying this according to the journal. But remember when Kate Rooney spoke to Brian Armstrong
a few weeks ago in there, she asked him what they could pull back on operational and he mentioned cloud costs as well.Share
43:21
So I wonder if there's a growing number of CEOs out there thinking: how can they cut costs? Maybe cloud is the place to do it, and what effect that's gonna have on the market?
Share
John Ford
43:29
You gotta be careful though because then when you have a popular show and people can't stream it, and then they shut off
Netflix
, suddenly you wish you had paid for your infrastructure. So it's going to be quite a rope to walk. They want to make sure that they have enough copies content management in places where people want to see it, Carl.Share
Carl Quintanilla
43:50
Yeah, pretty fascinating. And, and you know, all of this is being done in an effort to keep the emphasis on content spend right?
Share
Deirdre Bosa
43:58
It's that you asked that question and I said, "Yeah, that's gonna stay intact". There's going to be... how did you put it like Reservoir Dogs, I got that one.
Share
John Ford
44:06
No one ones to put down the guns.
Share
Deirdre Bosa
44:08
It'll be interesting. I wonder what, you know, some of the exactly, content sort of in terms of sports rights, we've seen that pulled back a little bit, but it just seems like this arms race, John, where no one wants to be the one to scale back on those big blockbuster series as we have Lords Of The Rings, and what is the House Of The Dragon? I'm not watching that one.
Share
John Ford
44:25
Well, somebody who's certainly not scaling back
Apple
. This is the biggest product launch in tech that we're going to get today. Don't forget, it was just a few years ago, people were saying, "$1000 phone, who's going to pay for that?" Well, you know, the price is probably going up at least in some countries, interesting how they'll handle this strong dollar Carl.Share
Carl Quintanilla
44:44
Yep, and of course we'll continue to fill you in on headlines from the amazing lineup here at Code today, as we said earlier,
Andy Jassy
of Amazon Apple's
Tim Cook
, Jony Ive,
Laureen Powell Jobs. And of course, we'll wrap up coverage on day two of our coverage of Code here tomorrow on TechCheck on squawk on the street. The half begins now.Share
Deirdre Bosa
45:02
You've been listening to
CNBC
TechCheck. You can always catch us live weekdays at 11 a. m. Eastern.Share
Break
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Carl Quintanilla
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Kara Swisher
David Trujillo
Aaron Levie
Evan Spiegel
Mark Cuban
Steve Kovach