Why Snap will get acquired before 2020, probably by Amazon

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On the first episode of Pivot, Kara Swisher and Scott Galloway also discuss the Instagram co-founders’ dramatic exit and “tech bias.”

Editor’s note: Recode has a new podcast! It’s called Pivot and every week, our editor at large Kara Swisher will break down the biggest stories in tech and media with L2 founder Scott Galloway, a fan-favorite repeat guest on Recode Decode and a professor of marketing at NYU. Here’s the first episode. Enjoy!

NYU’s Scott Galloway loves making big predictions about what companies Amazon will gobble up next. On past podcasts, he predicted Jeff Bezos & co. would acquire Whole Foods (correct) and possibly the department store Nordstrom (that one hasn’t happened … at least, not yet).

On the first episode of our new podcast Pivot, Galloway proposed a new M&A target: Snapchat maker Snap.

“Snap needs something,” he said. “I believe this company is going out of business … Snap will not be an independent company by the end of 2019.”

“People talk about how its stock has gotten crushed, but it’s still got a market cap of $13 billion,” Galloway added. “So I believe the stock gets cut in half again, but any acquisition is sort of an eight or a 10 billion dollar check. And there’s a limited number of companies that can buy a company that’s not making a lot of money for eight to 10 billion dollars.”

He ruled out Facebook and Amazon, leaving only two potential acquirers in America: Google and Amazon. And he believes Amazon, which just launched a commerce-focused partnership with Snap, makes more sense than Google, which has repeatedly failed in social media.

“I think Bezos says, ‘Alright, you have a core constituency that buys stuff and buys stuff irrationally,’” Galloway said. “High-margin coffee, flying knit tennis shoes, they’re crazy. We love teenagers because they’re stupid because they spend all their money.”

You can listen to Pivot with Kara Swisher and Scott Galloway wherever you get your podcasts — including Apple Podcasts, Spotify, Google Podcasts, Pocket Casts and Overcast.

Below, we’ve shared a full transcript of Kara and Scott’s first episode.

Kara Swisher: Hi everyone, welcome to Pivot, from the Vox Media Podcast Network. I’m Kara Swisher, founder of Recode, and I’m joined by my no-mercy, no-malice co-host, Scott Galloway. Hey, Scott. How’s it going? Where are you this morning?

Scott Galloway: I’m in New York, Kara, the Vox Studios downtown. Where is Kara Swisher?

I’m at the Vox Studios in D.C. in the District of Columbia in Washington. So, this is our first show. Everyone’s looking forward to it. They think we’re going to do bad things, which is really interesting from the reaction on Twitter. But-

Let’s hope so. Define “bad.”

Let’s hope so. We’re going to do bad things. And I polled people to say, “What does our photo look like?” And I don’t know which one you thought was best, but my favorite one was “Cagney & Lacey is really going to be lit this season.” I thought that was-

Yeah, but am I the first or the second Lacey? I was about to weigh in, but I-

You’re totally Cagney. Hello, nice to meet you.

I thought we were literally the new sitcom on Bravo where you’re the tough but lovable cop in 2B. I’m the wacky neighbor that just discovered meth. What do you think? What do you think?

Yes, that sounds good. That sounds great. That sounds perfect. Alright, well let’s get into discussions this week. We’ve got a lot to talk about. And we’re going to start first with our first segment, which is a big story breakdown. I think the big story this week is Instagram, and I’ve been spending a lot of time talking to people in Facebook about what happened here. I have a very good sense of what happened. But I just sort of would like your thoughts out of the gate, and then I will give my thoughts on that.

Well, you’re the insider here. My sense is that when founders … So, my company was recently acquired 18 months ago by Gartner. When a company is acquired, it’s not if but when the founders are going to leave. I think the clock starts right away. Control is a very addictive substance, and founders are used to control. So the fact that they were there six years actually I think is pretty impressive, the question I would throw back to you is it seems like a lot of these departures are coming at the same time. Is there something wrong in Mudville here?

Well, yes. I think actually … I don’t think it’s too long. I think they wanted to stay. I don’t think they wanted to go. I think they liked working there. They were hoping to work there their whole lives. I think … Not their whole lives, but a long time, as long as they could be creative and be in charge of things. But I think what happened is after Cambridge Analytica, after all kinds of stuff, Mark Zuckerberg asserted himself, especially because Instagram was sort of the engine and Facebook was not anymore. I think this was a situation with — let’s say what it is.

Kevin Systrom and Mike Krieger who created Instagram, left the company suddenly on Monday without telling. They just did it all of a sudden. I think they were pushed really hard by a lot of changes in Facebook that they thought ruined their product, essentially. So I don’t think this was a, “Oh, we’ll just go.” I think they didn’t want to go and left under duress, from my perspective.

The press release kind of validates that because if you read the press release, clearly Facebook did not approve it because it says “we’re looking forward to exploring our creativity again.” It’s basically sort of, “We’re going to start something else and for whatever reason-”

“We couldn’t do it here.”

Yeah, we couldn’t find it here. That was not a brought to you by Facebook press release. What are some of the points of tension?

Yeah, we wrote about them a lot on Recode.

Do you have any sense for what actually pissed them off?

Yeah, everything. They would tweak … For example, a stupid thing, but it was important to these people is the imposition of ads. The way they were going to impose ads I think they always resisted. When they’re sharing things to Facebook and back and forth, one of the great drivers of growth was being shared back and forth essentially for both sides. So when you share things from Instagram to Facebook, it used to say it was from Instagram, and then there’d be a link back, and it created lots of referrals back to Instagram. But you created on Instagram. And Facebook removed that. So it looked like you posted it on Facebook. It looks like you’re using Facebook. I found that incredibly deceptive, and I think they did too. I think they’re more, both Mike and Kevin, whom I know really well, are very much more in the consumer camp than they are in the “Let’s help advertising” camp.

What is the general mood at Facebook after? I described it as … Here are the last three Thanksgivings for a Facebook executive: “It’s great to see you. You’re awesome.”; “It’s great to see you. You’re amazing.”; “It’s good to see you. You’re running America.” Isn’t there a ton of tension right now among senior executives there?

Yeah. Well, there’s executives who are close to Zuckerberg, and there are ones that aren’t. You know what I mean? I think they’re very … One of the things that I kept getting from a lot of people on the Zuckerberg side here, and it was very clearly Mark Zuckerberg pushing this whole thing, these changes in Instagram that the founders did not like and the more control he was trying to take. I think the ones that are inside with him are, I don’t want to say cult-y, but they agree with him. And they kept saying, “Mike and especially Kevin are team players.” And I’m like, “You need fewer team players and more people that disagree with you.” You know what I mean? It was interesting thing. So I think there’s a tension within the company of people who are in with the current administration and not in with the current administration. There’s people on both sides. And this was the most potent example. What I think was worst about it is it affects product. You can talk all you want about ruining democracy and the Russians and this and that, but this actually affects product. And when product starts to get affected, I think that’s when companies go downhill.

It’s funny you say that. It’s Silicon Valley. It’s through the lens of Silicon Valley, and that is our democracy and Russians, that’s a concern, but the product … Watch out!

No, of course. But that’s how they’re going to go down. You think they’re going to go down over the Russians? They’re not going down over the Russians. They’re going down when their product is shitty. That’s it. You know what I mean? That’s all I’m saying is of course what they’ve done is a gross mismanagement and use of their platform. But what’s really going to kill them is something much different. That’s just what I’m … and I think it bears out when products go, that’s when companies go.

The consumer has the final say here. And who wins here? Whenever there’s senior level departures, there’s a sucking sound upward. Who’s the new man or woman at Instagram?

Probably a man named Adam Mosseri who was brought in. He’s very close to Mark Zuckerberg. He’s a very competent person, but he didn’t found the company. You know what I mean? He didn’t found the company. These were two really smart entrepreneurs at their peak, and I’m not sure … They weren’t, like, laying around. They weren’t resting and vesting in any way. So I think that’s always a mistake to remove creative, interesting founders. And I think this is a big mistake what happened here.

It’s so interesting because pre-Jobs founders … I’ve been starting companies since I was 25. Pre-Jobs, we were considered a crazy liability, that our shelf life was [until] the company got a CFO and then VCs brought in gray hair management. Post-Jobs, especially after his successful return to Apple, now we’re seen as invaluable to the DNA and should be kept at all costs. It’s literally the pendulum has swung the other way.

Well, if they’re helpful. Like, look at Travis Kalanick and look at some others. You know? I don’t know.

Next thing. We are going to talk about these … Attorney General Jeff Sessions is meeting with state attorney generals about tech industry biases. Put on your tin foil hats everyone, Attorney General Jeff Sessions is talking about the power of the tech industry with a group of states attorneys general, or is it attorney … whatever … about bias on social media against conservative viewpoints. Scott, is this real? What can the state A.G.s actually do about this, or is it just a lot of blather?

Well, actually the red state A.G. play is how sort of tobacco was taken down. So there is something here, and I’ve always felt that the war against Big Tech will be waged out of Brussels or from a red state A.G. who sees a blue line path from the A.G.’s mansion to the Governor’s Mansion as a populist argument against Big Tech. So the A.G. army is an effective fighting force against Big Tech. The problem is that what you’re going to see with Sessions and the administration continue a pattern of snatching defeat from the jaws of victory. And that is, there is real anti-competitive concern here. These companies have just become too influential, bad for the economy, a host of reasons, anti-competitive practices. But they’re going through the wrong door here.

This notion that there’s a bias against conservatives is just so ridiculous. You know those guys. I’ll tell you what I think. I know these people. I don’t know them as well as you. They don’t lean at work. They don’t lean right. They lean down. And anything that gets them more engagement and more Nissan ads is cool with them regardless of the political standpoint. And the notion that conservatives have somehow … Their voices have been squished … Lester Holt is not giving a platform to Alex Jones. Trump has a direct pipeline to 54 million users despite violating the Terms of Use every goddamn day on Twitter. So the notion that this has been anything but amazing for the far left and the far right is just ridiculous.

I agree. I think they really are … I sit there and I’m like, “That’s not what … You should be focusing over here.” Like, over here they’re actually doing bad things. Here, they’re not. It’s just one of these things where it’s gotten politicized, obviously, as everything has. And then it’s a waste of time. And this is an opportunity missed to do actual focus on things that matter, such as anti-competition, all kinds of things that are really of concern. And the growing power of these different companies on our country. And instead, they’re sitting around here saying that Diamond and Silk can’t talk. They can talk. They never stopped talking. And it reminds me a lot of when conservatives fixated on gay rights, if you remember. They just went on and on and on, and I think they lost so much ground on that one because they were never going to win that one. It was just … I don’t know. It’s just a-

You had a great line in one of your articles that said that the people who complained about being silenced are the ones who never shut up.

Yeah, yeah. That’s right. They don’t. And there’s plenty of places to talk online here. You just can’t talk on some of these platforms. I just don’t know what … What could these state attornies actually do? Force them into what? I mean, it’s a legal quagmire of loss. You cannot … I don’t think you could enforce any of these things.

They’re just blowin’ it because this could have been a bipartisan issue. You have the far left and the far right concerned about these companies’ growing influence. But instead, they’re going to turn it into, “You’re bad for conservatives,” which means they’re going to lose the far left in terms of any attempt to reign these guys in. It’s just … It’s reminiscent of the Amazon Washington Post, the ham handed attack from Trump, where he basically undercut legitimate concerns about Amazon.

Yeah, and so why did they do it? Was it just press?

I have such a terrible time predicting this administration. I don’t understand 95% of what they do. It feels just very political. And unfortunately, there’s real harm here. This could have been a bipartisan effort. And what’s going to happen is Big Tech is going to respond thoughtfully in a measured way with data. Big Tech is going to act presidential. The other is president. You’re going to see … I don’t know what the analogy is. It’s like complaining about minimum wage because you want young people to smoke more. Okay, we should raise minimum wage, but that’s not why. You end up contaminating the whole argument. Anyway, the whole thing makes no sense.

Absolutely. I think they’re going to slip right out of it. I think they’re going slip right out. By the way, they should slip right out of this.

Yeah. Agreed.

This is insane. This is just a waste of time, and again focusing on things. And then we’ll get like 60 tweets from Trump about the silliest of things when we should be focusing on bigger things.

We’re going to talk about Snap and Amazon. Explain for the people the situation.

So, Amazon and Snapchat announced a partnership earlier in the week where you’ll be able to use Snapchat to zero in on a product, and it’ll be recognized, kind of a visual search, and you’ll be queued or prompted with that product page on Amazon. So the link between social and commerce … It’s a … It caused a lot … Rightfully, it got a lot of interest because, one, Snap needs something. This is a company, Kara … I believe this company is going out of business. I do not it will be a … Prediction, Snap will not be an independent company by the end of 2019.

Independent, you mean sale or-

It’ll get sold. 100 percent.

To who?

Well, that’s-

I’m not going to let you off the hook on that one.

That’s the correct question. So first of, 10 to 100,000 kids every week say, “Hey, we tried this new version of Snap called Instagram Stories,” and they switch. And so the metrics-

They might have caught a break here with Kevin and Mike gone, by the way, at Instagram. But go ahead.

We’ll see. I think the bench is probably deep enough to be fine. But anyways, you have a situation where I think there are a limited number of buyers. So Snap, even though it’s … People talk about how its stock has gotten crushed, it’s still got a market cap of 13 billion dollars. So I believe the stock gets cut in half again, but any acquisition is sort of an eight or a 10 billion dollar check. And there’s a limited number of companies that can buy a company that’s not making a lot of money for eight to 10 billion dollars. So the universe gets very, very narrow fast.

So, who? Come on.

It’s either Google or Amazon. And you said to me, and I had not thought about this a month ago, that the only guy that Evan Spiegel would want to work for is Bezos. I know who it won’t be. It won’t be Facebook.

Or Apple. Or Apple. He’d work for Tim Cook.

He’d work for Tim Cook. But Apple is not that acquisitive.

They’re not getting near it. Are you kidding? They’re not getting near …

They’re not that acquisitive. And I think Bezos says, “Alright, you have a core constituency that buys stuff and buys stuff irrationally.” High-margin coffee, flying knit tennis shoes, they’re crazy. We love teenagers because they’re stupid because they spend all their money-

Do you know I bought high-margin coffee yesterday, but ahead, go on.

Or Yeezys, did you get your kids a pair of those?

I don’t want to show you my shoes. They’re like … Go ahead. Move along.

And then, so, the other real interesting piece of information here is the former VP of finance from Amazon is now the CFO of Snap. And basically the CEO and his top finance people become like twins that can communicate non-verbally because it’s very important. The CFO and the VP of Finance are what I call the CEO’s source of truth. So I can see this guy, the CFO, calling Jeff and saying, “Look, this is the deal with our company. This is why it makes sense for you.” And then literally short-circuiting an acquisition. And this might be-

Yeah, that makes … That’s the best buy. And what about Google? Make the Google argument.

I don’t think I have a good argument for Google.

I don’t either.

They’ve tried to be in social. It hasn’t worked.

It can’t.

I don’t know if they need to be.

They don’t need to be.

I just don’t know.

And they’re robots. They just can’t even. Remember when they were doing Google+ or whatever the hell it was? I was like, “Oh, stop.” It’s painful to watch.

That was rough.

And they had one of the original ones with Orkut if you remember.

I don’t not remember Orkut.

Orkut was this little guy named Orkut that worked there, and he created one of the earliest social networks, right on par with Facebook and others. It got very popular in Brazil and some other countries. Some strange countries.

Oh that’s right. It was the big social network in Brazil. There’s where I remember it.

Brazil and a few other small countries. And I remember a Google executive saying, “You know, we’re really big in Brazil.” And I go, “Way to lose it.” Like, Brazil as compared to the United … Facebook was killing it in the United States and also in bigger markets. And it was just … He was a great guy. He still is around, but I think they killed the thing off. But they just can’t do social. They can’t. They just shouldn’t. It’s painful to watch in so many ways.

So who does that leave? No traditional media company can afford that check and losing money, but Amazon, if they think they can pick this thing up for 10 billion, which would be a 1% dilution on a trillion dollar market cap and capture a core constituency that gets them traction among high-margin products, maybe gives them another entry point, gets more people on their app-

Goes with entertainment.

Maybe they stream stuff from Amazon Prime Video? There might be a pony in there somewhere.

I like it. I like it. I like it. I’m going with it. I agree with you on this one. I don’t think there’s any other buyers, except for an Asian company.

One of the big guys?

One of the Chinese companies. Yeah, WeChat or something like that.

Yeah, and then Jeff Sessions says it’s a security risk, right so …

Yes, oh yeah, because what goes on on Snapchat is high security.

Yeah, it’s AI. They’re going to weaponize our youth, Kara. They’re coming for us.

They are going to weaponize-

It’s the robot army of our 15-year-old boys is coming for us.

Yeah, yeah. Although I have to say, I have two kids. They still use Snapchat. They love Snapchat.

Yeah, you said they love it.

They use it as a communications tool. That’s what they use it as 100 percent.

And Instagram stories, have they tried it or don’t know about it?

They do, but I think it actually goes along gender lines. I think more girls use Instagram Stories. It’s interesting. They use it sometimes, but just the other day, I was like, “How are you liking Instagram?” And one of my sons goes, “Oh, they museum?” And I was like, “What?” And he goes, “You put up pretty pictures there. That’s all.” It was not fun or useful or utilitarian. It was just a museum. That’s what he called it. I thought it was very smart actually.

GOAT: Greatest of all time this week. What inspired you?

I think Craig Newmark for funding The Markup. It’s being done by Julia Angwin, who I actually went to school with, and some others, who are getting together to look at Big Tech, to look at issues around Big Tech. And I think that Craig is … I did a great podcast with Craig Newmark. He started Craigslist, obviously. And he’s been giving a lot of money to journalism efforts. He gave one to a school recently, a big school, in 20 million dollar increments essentially. Made a lot of money from tech, and he’s using it to support journalism. I think it’s a great thing. He’s an unusual and sort of an odd character in Silicon Valley. And I think he’s really enjoying his media mogul-hood in this way. And it’s a very different way from others like Marc Benioff who bought Time and Laurene Powell Jobs and Jeff Bezos. It’s really trying to really support traditional journalists into doing what they do best. So, he wins it.

Well done Craig.

Well done Craig.

And so I had a moment of inspiration. Kara, yesterday, I met one of my heroes, legitimately one of my heroes.

Who?

EU Commissioner Margrethe Vestager.

Vestager. Yes, she’s great. Margrethe is great.

I’m on the train back from Acela, and I see this woman outlining an analyst report.

You met her on the train?

I stalked her on the train. An analyst report, and you know what she was doing while she was highlighting this report? She was knitting. How awesome is that?

Oh, yeah she knits. She’s a knitter.

I got off the train. I introduced myself. Took a picture with her, but this is woman who is fearless, fighting for the EU middle class, and is fiercely intelligent. Just really exciting.

She’s amazing. They did a whole series about her in, I think, Denmark.

Yeah, she’s incredible.

Margrethe Vestager is the EU Commissioner who has been sort of making every tech company’s life a living hell. And it’s great to watch. I’ve interviewed her twice and I think she’s really quite something. She’s like a superhero, and they hate her in tech. They’re polite about it, but they really hate her.

Yeah, I would argue she’s the only public official in the world right now whose testicles have descended when it comes to dealing with Big Tech.

You don’t need testicles. You don’t need testicles, Scott, to be difficult.

You get it. You understand it.

No, I don’t. I’m not using a testicle.

We’re taking back … We’re taking back the inappropriate for the left, Kara.

We’re not using balls. We’re not using testicles.

Oh, come on.

We’re not going to be using “man up.”

Oh, come on. We are taking … We are taking the irreverent back for the left, Kara.

No, no. We’re not using that word either. I’m not going to repeat it. That’s fine.

Why does the right get to own the inappropriate?

Oh.

You and I are taking it back.

That’s not words I like using. We’ll come up with new metaphors. I’m not trying to be politically correct.

Okay, okay, good enough.

But there are other metaphors we can use. Alright, absurd quote of the week. Anything comes to mind?

Right back to you. I’m sure you have several.

So much is so absurd. I think the stuff around Instagram. The fact that Facebook had no response to this because they were obviously taken unawares. These guys just came in … They had been dropping bombs all over these guys for months and doing different things and messing with the thing. Even though they did sell it, I get that, they still had given them enormous autonomy and then just changed the rules of the game. And so these guys just left, dropped the mic and left. I thought that was kind of fantastic.

And by the way, from a seller standpoint, worst trade in history, best trade on the buyer’s side.

It is. Although, they did get a lot of stock, so I think they did just fine.

Oh they did as well?

I think they’re going to walk away with hundreds of millions of dollars. A lot of it was in stock, so it went-

Oh wait, my worst quote, and I’m piling on here, but your favorite person said, “She said she was drunk.” Right? Oh, okay. Okay. Then all bets are off. She was drunk. Anyways.

You know what’s interesting about Trump, he doesn’t drink at all. Like myself, he doesn’t drink at all. So he has an issue with-

You don’t drink at all?

No, I don’t. Not really. Every now and again.

Oh, Kara, start. It’s wonderful.

No. I do it every now and again. I’ve recently … Alright, thanks. Let’s not-

Trust on me on this. As Winston Churchill, said, “I’ve gotten more out of alcohol than it’s gotten out of me.” Trust me. More TV, more alcohol.

I like television.

Boom, I’m adding value to your life, Kara.

Alright, thank you.

Alright, so last segment, our predictions. Because you have to make a prediction every week now, just so you know. And they have to be right. So what is your prediction?

One, we’ve already made one, and that is by the end of ‘19, Snap is no longer an independent company.

That’s a good one. Okay, do you have any others?

I think Facebook, and I’m talking about book here because I own all of Big Tech, but I think Facebook is … I think the stock is remarkably undervalued. And to be clear, bad for America, bad for the planet, but I just think the stock is going to scream when people realize that probably they’re going to get through this, and they’re going to start posting just enormous numbers. It’s going to turn into Apple three years ago where it just looks incredibly cheap.

Alright, and Mark Zuckerberg still at the helm?

Oh, yeah. Why do you say that? How could he not be at the helm?

I think this-

He clings to power like … He makes an African dictator look charming. How on Earth does Mark Zuckerberg leave? Two classes of stock, how can he leave?

I just think this one was bad. This was not a good look. I’m sorry I just-

The Russia thing?

No, the Russia thing. Of course the Russia thing. But I think he flew out of that one. I think this one he’s not going to fly out of, the Kevin Systrom and Mark Krieger.

You think that’s how Mark Zuckerberg goes down?

I’m just telling you. You just trust me. Just trust me.

Oh my gosh.

It’s like Al Capone and taxes. I’m just telling you. It does not leave him beloved among people.

In 10 days, no one remembers their name. They’re like Trotsky being erased from photos.

Oh my god. Brian Acton, who was on of the founders of WhatsApp, just gave a long interview about how Facebook …

Yeah.

That stuff starts as “this is a sucky place to work,” and then you get hated. And then … I don’t know. It’s just … it’s not a … it’s got bad juju all around it. That’s all I’m saying.

Good stuff.

It’s stuff. Anyway, alright, Scott we have to get out of here. Who do we have coming-

You have to get out of here, Kara. I am embarrassingly available.

Are you? I have to get out of here. I’m going to New York for New York Times conference that I’ve agreed to appear, and I’m talking to some lovely top women executives about how Silicon Valley is doing. And then I’m doing an interview with Samantha Bee about all kinds of things, including an app she’s doing, which I helped with her a little bit.

Wow, I’m curious what she is like in person.

She’s lovely. She’s shy. She’s lovely.

Really?

She’s Canadian, right? So, yeah, she’s very Canadian.

Really? Well, Canadian, that says it all.

I think she’s Canadian.

By the way, that’s back to that inappropriate thing. That is technically a racist stereotype. But I’m going out on … How do you get a hundred-

I mean that in a nice way.

How do you get 100 drunk fraternity guys out of your pool in Canada?

Oh my god.

“Hey guys, could you please get out of the pool?” We’re taking back the inappropriate, Kara.

You are not going to be doing this. You are not … No, you’re not. Canadians is as far as I go on that issue.

Okay, okay. Good stuff.

And I love Canada, by the way. I love Canada. I love Canada so much. Anyway, Scott-

Yeah, I’m going to Canada. Tonight, I’m going to Toronto.

Oh, alright. Enjoy yourself. Why don’t you tell that joke there and see how it goes over?

There we go. There we go.

Alright, anyway, thank you for joining, Scott. Looking forward to talking every week.

Likewise.

Thanks for listening to Pivot from Vox Media, on our first show. Join us next week for more breakdown of all things tech and business. If you like what you heard, please subscribe on Apple Podcasts or wherever you’re listening.

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