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Inside the Shutdown of Zenly, as executed by Snap
Snap suddenly decided to shut Zenly down: an app with 40M monthly active users, growing fast. What happened, and what can other acquisitions learn from the fate of Zenly?
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Zenly is a location-based social network that helps people see their friends on a map, and communicate with them. The app launched in 2015 in Paris. In 2017, as the app was starting to show traction, Snap acquired the company for $213M and kept it running as a separate division—and app.
Back then, the app had fewer than a million monthly active users (MAUs). I talked to a software engineer who worked there at the time, who estimated that this number was a few hundred thousand. Five years later, the number was more than 40M MAUs, which was around 8% of Snap’s roughly 500M MAUs. There were a few months in 2022 when Zenly had about a third of the number of global app downloads that Snap had:
The team at Zenly felt they were doing great. When Snap acquired the company, the guidance Snap leadership provided to Zenly was to focus on growth, not on monetization. The company did just this. By 2021, growth had picked up significantly, and this growth expanded.
Zenly was having a fantastic year in 2022. In March 2022, the app was the tenth most downloaded social app, globally, according to data.ai. The company launched a major update in April, which was less well received by users initially, but even so, usage from 2021 was up, and started to trend upwards a few months later.
In the middle of the highest growth Zenly has seen since Snap acquired it, the app is being shut down and the team let go. On Wednesday, 31st August, Snap announced that it is laying off 20% of its workforce and shutting down Zenly. I talked to software engineers at Zenly when this news was announced, and they were stunned in disbelief.
Why would Snap shut down one of its fastest growing products? Why invest years in the growth of Zenly, only to throw it all out the moment that work bears fruit?
Zenly was run by a lean team of ~70 employees. The majority of these employees were based in Paris. Given that there was no other staffing for the app, which reached ~40M+ MAUs, I find it curious to close it all down. On the one hand, this division was not making any money. On the other, Snap never asked Zenly to monetize, and engineers at Zenly told me they could have easily shipped money-generating features, if this was a goal.
So why not sell Zenly, given that the product they built is valuable? Snap could potentially make more in a sale than the $213M that it paid for a company with less than 1M MAUs back in 2017.
Employees I talked with speculated that perhaps Snap does not want to create competition by selling Zenly. The app was growing faster than ever before, validating that there is large demand for a location-based social network. If Snap sold off Zenly, it would result in revenue, but the competitor created could become a problem for Snap down the line. By shutting down Zenly, Snap can both write off the acquisition cost and not have to fear creating a competitor.
Snapchat also launched its own location sharing maps feature, Snapchat Maps, in 2017. This experience is bundled inside Snapchat, and was not built by the Zenly team. Because of the overlapping features, I can see how Snap leadership might have seen shutting Zenly down as a strategically wise decision.
Looking at countries where Zenly was popular also helps explain why Snap leadership is removing the app. “Growth comes from the East” was how some Zenly employees referred to the growth trajectory of the app. The most popular markets for the app included Japan, Vietnam, Indonesia, and Russia. These are markets where Snap was not popular. However, they are also markets that are less monetizable. Given that Snap is focused on revenue generation, it makes sense that it would cut an app that is strong on markets where monetization is likely very far out.
Zenly employees feel that Snap leadership did not take time to understand how Zenly works. Talking with employees in leadership positions, I was told multiple times how Snap leadership seemed disinterested in understanding how Zenly operated. Although Snap leadership visited the Zenly offices years ago, they have not done any due diligence or deepdives on how this unit was run.
My sources tell me that this was not a problem until April 2022, when CEO and cofounder Zenly, Antoine Martin was heading up Zenly. However, after his departure there was also no interest from Snap to get more details on the workings of this team.
Between Antoine Martin leaving in April, and now, with the layoffs in September, Snap made no efforts to map out the cost structure of Zenly, an employee in a leadership position at Zenly shared. This person shared that if cost was the issue, they could have easily reduced the running costs to a fraction. They could have also built revenue generating features quickly.
My source was bitter about what they felt was ignorance from Snap’s US leadership, in not taking any time to look into the inner workings, the structure, and the dynamics of Zenly before deciding to shut it down. The Zenly team prided themselves on moving fast, executing quickly and having no trouble with rapid direction changes. It felt to me they would have adapted to new constraints - which adoption opportunity Snap never gave them.
So what happens with Zenly? The team which has built and is maintaining the application is in the process of being let go. The application is still live in the iOS and Android app stores, but I am told it will be removed at some point.
Zenly employees to be laid off created their own Zenly Talent Hub. They did this because they are not yet eligible to be listed in Snap's Talent Hub because Snap only lists employees who are laid off, and Zenly folks are in a pending stage.
There are no plans to move Zenly users over to Snap, at least not at this time. The Zenly team is currently busy navigating the layoffs process in France, and most of them are preparing to put a closure to this journey - which was as long as seven years for some of them.
In a statement, a Snap spokesperson shared additional background on the plans with Zenly's wind-down, and confirming that they will allow Zenly users to download their data before the app is removed from the stores:
"Snap has now filed a proposed job protection plan with the French Labor Authority that includes the economic rationale for the wind down of Zenly, which details the social measures the company intends to implement and provide to impacted team members. We expect a decision on this filing in the next two months. In the future we intend to let the Zenly community know about the plan through a variety of channels – including in-app, on Zenly’s website, and via social channel – and will make it easy for every user to download their data.As part of its social commitment, and under the supervision of the French Labor Authority, Snap has been presenting a restructuring plan with a full set of measures in order to support each employee in securing their next employment. Measures include training budgets, relocation package, financial support for job interviews (in France or abroad), company creation funding and support with outplacement companies."
What can be learned about acquisitions from the fate of Zenly? Once a company is bought, the acquirer is in charge. Zenly was never truly in charge of its destiny: It was always up to Snap whether it kept investing, froze investment, or—like now—shut the app down, and let the team which built the app.
The CEO of Zenly, Antoine Martin, left the company in April 2022. This departure surely did not help the internal strategic position of the Zenly team. With Zenly’s CEO gone, I’d speculate that there was no one to defend the division when Snap had to decide what teams to cut to reach a 20% saving.
Snap seems to be retreating from markets it does not expect to monetize, and is no longer investing in products that won’t bring revenue in the short term. Zenly was popular in markets where monetization would have been challenging, and made no money.
This was one out of the five topics covered in this week’s The Scoop. A lot of what I share in The Scoop is exclusive to this publication, meaning it’s not been covered in any other media outlet before and you’re the first to read about it. I’m adding an ‘Exclusive’ label to news which features original reporting direct from my sources, as distinct from analysis, opinion and reaction to events.
The full The Scoop edition additionally covers:
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Apple’s return to the office (RTO) in London. Software engineers working at Apple in London are already back at the office. How was this RTO executed, what are the challenges, and what are current Apple engineers saying about this work setup, versus remote work? Exclusive.
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