Crypto News: Snap has a TikTok problem

Hi there, it's Alex in Los Angeles. There's a multibillion-dollar battle raging for young people's time online. But first...

Today's must-reads:

• Stanford was subpoenaed by Elon Musk in his legal fight with Twitter
• North Korea has about 6,000 hackers tasked with spreading malware
• Mark Zuckerberg's metaverse pitch is falling flat

Snap Inc. is having a very rough week. The company said it was firing 20% of its workers, canceled or scaled back a number of buzzy projects, lost its chief business officer to Netflix Inc. and reorganized the advertising sales department under a new executive.

The company, parent of social-media app Snapchat, has blamed economic uncertainty, which caused a pullback in advertising spending on the platform. But there could be a bigger reason the company has seen revenue deflate. Its reputation as the social media platform for young people has faded—particularly in the eyes of advertisers.

Snap's strength lies in its person-to-person messaging, a format with few opportunities to sell traditional video- or photo-based advertising. The company makes most of its money selling ad placements peppered between videos posted publicly—in an entirely different part of the app—or by enlisting brands to create bespoke filters and virtual try-on experiences.

"While Snapchat's leading capabilities around AR are on trend with consumer shopping behaviors, the platform was not able to keep up with the addictive nature of TikTok," Kelsey Chickering, principal analyst at Forrester, said in an email. "Snapchat's product improvements and their investment in a creator community never captured the same magic—sticky, endlessly entertaining, time consuming—that TikTok has mastered."

In June, Snapchat was the third-most-likely used app among Gen Z users, trailing behind TikTok at No. 2 and Instagram in the top spot, according to analysis from data.ai.

Meanwhile, as TikTok has ensnared young users, it's also drawn advertiser spending on videos and influencer campaigns, selling its ability to personalize individual feeds (and the ads in them). TikTok raked in $4 billion in revenue last year and is on track for $12 billion in 2022, according to research firm eMarketer.

And though advertisers may be spending less overall, they're still spending. Their abandonment of Snap in particular has prompted investors to flee the stock. Shares rose Wednesday on the news of job cuts and cost savings, but the company has still lost 75% of its value since January and is on pace for its worst year ever.

It wasn't so long ago when people believed that Snapchat owned the market for young users. I covered its 2017 initial public offering, when the company sold a vision of itself as a budding, inventive startup uniquely positioned to build a booming advertising business around a new generation of consumers. Investors largely bought into that story.

Today, Snap's market value is less than it was at its listing, even though the company is expected to make more than five times as much in revenue and has significantly grown in users, even surpassing Twitter. The premium investors once put on Snap's potential has fizzled. Now, to win back Wall Street's affections, Snap will have to prove not only that it can make money, but that it can compete with TikTok. —Alex Barinka

Amazon is still trying to digest Whole Foods. Whole Foods co-founder John Mackey is retiring, five years after selling his organic-minded grocery store to the e-commerce behemoth, amid major questions about the logic of the deal.

Washington DC is suing Bitcoin bull Michael Saylor for not paying income taxes.

Cloudflare hints that it won't cut ties to Kiwi Farms, a site linked to harassment.

Chipmaker Arm has sued Qualcomm for breach of contract and trademark infringement—setting up a legal showdown between Arm and one of its biggest customers.

The Wing's last remaining co-working spaces are shutting down.

Join Bloomberg Live in London for the Bloomberg Technology Summit on Sept. 28 to see Europe's business leaders, policymakers, entrepreneurs and investors explain how they're adapting to this new environment—and discuss solution-based strategies.