In December 2016, Eyal Zak, an executive at a small startup called Cimagine, drove home to Kibbutz Megiddo with some big news. He excitedly told his wife that Cimagine had been bought by the American company Snapchat.
“My son heard this and started whooping for joy,” says Zak. “He rushed to tell all his friends – ‘My dad works for Snapchat! My dad works for Snapchat!’ He used that app all the time.”
The Zak family weren’t the only ones taken by surprise by the entry of Snapchat (now called Snap) into Israel. The messaging app, on which messages and pictures are only accessible for a short time, was very popular with the young generation but not perceived as having any great technological vision. Cimagine, a small company from Kfar Yehoshua that had raised just a few million dollars, developed an augmented reality technology that made it possible to “install” virtual furniture or other items in a house.
The connection between the companies wasn’t totally clear then: Snap did not elaborate on its plans, and the Cimagine acquisition, for an estimated $40 million, was not officially announced. Cimagine became Snap’s Israel research and development center, headed by Zak. Eleven months ago, Snap expanded its presence in Israel with the launch of a commercial section, headed by Assaf Sagy, to work with local advertisers and sell ads.
Until now, however, Snap has kept its Israeli activity under the radar. Now, for the first time, executives agreed to talk about the challenges they contend with and their search for the next big thing.
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Snapchat has become one of the apps most associated with the young generation. With 186 million daily users, it is far from being an empire on the scale of Google or Facebook, and has just had a particularly hard year, but it still has tremendous influence on media, social networks and digital communication.
Snap is responsible for a number of ideas and features that were later adopted by the tech giants and are now considered standard: messages with selfie pictures that are deleted after being sent; Stories – a series of pictures and videos that are deleted after 24 hours; Filters and Lenses – illustrations and animations that can be added to selfies, such as a dog’s ears and tongue, or a rainbow arcing out of a person’s mouth).
In the past two years, Snap has had to sit by and watch Mark Zuckerberg’s Facebook shamelessly copy these features in a to ingratiate itself with the young audience.
Now, Stories, Filters and Lenses can be found on Facebook and all of the apps that it owns – Instagram, Facebook Messenger and WhatsApp. 1.1 billion people now use the Stories feature daily on the various Facebook platforms.
At the beginning of 2016, Snap decided to upgrade the app’s Filters, Lenses and animation experiences and make them more realistic and more precise (for example, the illustrated dog’s ears must show up exactly on the user’s head, and a big tongue should appear when he opens his mouth).
To make this happen, it needed to acquire computer vision and AR capabilities. Cimagine, founded in 2012 by Yoni Nevo, Nir Daube, Ozi Egri and Amiram Avraham (who did not work in the company), fit the bill.
“There were companies in the global market that were developing a product similar to ours, but we were always one step ahead of them,” says Zak, who headed up the development of Cimagine’s mathematical engine at the time. “We’d gotten to know Snap through various conferences and get-togethers. Then one day they called and the acquisition process started.”
He adds: “Snap is a serious company. They checked first to make sure the technology belonged to us and that we really developed it. They made sure we knew what we were talking about that our product really suited their needs.”
Cimagine CEO Nevo headed up development at the time but recently left his position. Daube and Egri, the engineering and product team, moved to Snap’s Los Angeles headquarters.
The technology developed by Cimagine eventually became World Lenses, one of Snapchat’s most popular features. Based on AR, it enables you to insert amusing virtual images in the world around you. For example, you could cause a dinosaur to wave its tail in the middle of the room, or insert a dancing hotdog with earphones.
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“Snap puts a big emphasis on experiences and design. We’re not responsible for the experience itself. We’re mainly involved with what happens behind the scenes – the computer vision, the picture processing and the engineering elements of the product,” says Zak.
Some of things they’re working on at Snap’s Israeli R&D center include the computer vision and picture processing behind Spectacles, Snap’s smart-camera glasses. These are glasses equipped with a camera and linked to a smartphone, making it possible to take pictures and film videos from your point of view and share them on Snapchat.
The original glasses were launched in 2016 amid huge buzz but ultimately were deemed a commercial flop. The company isn’t giving up: It launched a second generation of the glasses and is reportedly considering a third generation, with two cameras and the ability to create 3D effects.
Why do you persist with the glasses, despite the early failure?
Zak: “We’re doing a lot of cool things with Spectacles, both the ones that are around already and the coming version, with expanded capabilities and improvements. We’re working on other physical products that in the pipeline. Snap is a big believer that in the future we won’t keep using smartphones. We believe that, and we’re always looking for the next thing.”
Snap’s R&D center is located on Moshav Kfar Yehoshua near Yokneam and Kiryat Tivon. “The closest building to us is the cattle shed,” says Zak. “We once thought about moving somewhere else, and Kfar Yehoshua did really sound kind of strange at first. But everyone who’s ever come here has loved it and no one wants to move.”
Zak isn’t your typical R&D director either: He’s 39, married with six children, originally from Kiryat Ono and now lives on Kibbutz Megiddo. He commutes to work each day on a mountain bike – 40 minutes in each direction. “We have showers here,” he says reassuringly.
He has a bachelor’s degree in computer science from the Technion, and before Cimagine he worked in image processing at defense company Rafael. He came to the startup through Ozi Egri, one of the company founders, whom he knew from the Technion.
‘Kids go nuts’
How do people react when you say you work for Snapchat?
Zak: “Kids go nuts. I showed my daughter’s teacher the app, which a character that’s dancing on the floor. I told her – this is what you do with math and a degree in electrical engineering. She asked me to give a talk and this is what I did – I showed the students how AR technology works, without getting into the complicated formulas, of course. The idea was to open their minds, to use a product like Snapchat that they’re familiar to let them see that this is what you can do with math, so they see there’s a purpose for what they’re learning in school.”
Though the Israeli development center is small, Zak says it’s important to Snap: “They trust us and respect us, which is why they want to enlarge the center now and are looking for more people. We’re looking for talented folks with experience in everything from mobile technology to computer vision to deep learning.”
Snap’s interest in Israel also undoubtedly has something to do with Eitan Pilipski, the Israeli Los Angeles-based Snap vice president in charge of developing the company’s AR platform, who effectively also oversees the R&D center in Israel.
The company will not say how many workers it has in Israel, but the number is not too large. On the company’s website there are currently five positions advertised, including for a software engineer in the field of machine learning for AR, and software engineers for Android and iOS for the Spectacles product.
A few weeks ago, Snap held its first client conference in Israel in an upscale venue in Tel Aviv. The company did not stint on expenses. There was a lavish buffet by chef Assaf Granit; the space was filled with posters and banners emblazoned with the Snap logo; a huge gumball machine was placed at the entrance; and guests received a gift back of designer goodies.
The attendees were mainly reps from startups and online merchandising companies, as well as local content, media and advertising agencies.
Curious but skeptical
On the whole, they seemed curious but also skeptical about the possibilities of advertising on Snapchat. Israeli companies that wish to get their ads before young audiences around the world usually do so through Facebook, Google and Instagram – companies with billions of users worldwide. Snap wants to change this.
At the start of the year, the company launched a commercial division led by Assaf Sagy (formerly with Playbuzz and McKinsey & Company) and based at the Sarona complex in Tel Aviv to get more Israeli labels and organizations to invest in purchasing ads on Snapchat.
But Snap has also been facing some serious challenges lately. Snapchat was once seen as a bold and sassy challenger to the giants like Facebook. The perception was that it could really dent Facebooks’ dominance, especially with young people.
However, the company’s future is now in some doubt. Since it went public in March 2017, its stock price has fallen by 80% and the company has also seen a steady decline in its number of active users (In the last quarter, it lost two million). The drop has been blamed on anger over the app’s new design that displeased many longtime users, as well as on the growing competition from Instagram, which is especially popular with young people.
The departures of a number of top executives over the last months has created an air of instability. Still, Snap can take solace in the fact that its third-quarter revenues for 2018 were up to $298 million, compared to $208 million for the third quarter of the previous year.
Can Snap really break out today at a time when the tech giants are drawing fire for things like not safeguarding the privacy of users’ information?
Radhika Kakkar, Snap’s vice president of operations and global online sales, who was at the Tel Aviv conference: “From the very beginning, privacy was a core component for us. In every feature that we build, we think about the users’ information and what is done with it. The Stories and pictures are deleted – which makes privacy issues easier to deal with. This approach has helped us avoid the problems that other companies are having now.”
Snap is trying to attract new advertisers to the platform, but it hasn’t been easy.
In its early years, Snap gained a reputation for poor accessibility for new advertisers – It was difficult for new and small advertisers to place advertisements with the company. Its reps used to work personally with big advertisers to create campaigns, but this made it harder to reach a wider group of advertisers.
Later it launched a self-service platform, similar to that on Facebook and Google, which enables any label to create an ad campaign on the app.
But the company still struggles to attract advertisers. “It used to be hard to advertise with them,” says one startup executive whose company advertises on Snapchat. “Only recently did it start to improve.”