Pompliano, who had just been hired away from Facebook, contends that he presented methods to address the issue, but that Evan Spiegel, the company’s CEO, abruptly cut him off.
“This app is only for rich people,” Spiegel said, according to Pompliano. “I don’t want to expand into poor countries like India and Spain.”
The allegations are contained in Pompliano’s lawsuit, filed in redacted form in L.A. Superior Court in January. On Monday, Snap Inc. — the parent company of Snapchat — dropped its efforts to keep the unredacted complaint under seal and released it in a public filing.
Pompliano’s suit tells a story of his brief, three-week tenure at the company, during which he says he learned that the company was exaggerated its user data and that top executives were “completely misinformed” about key metrics.
Snap had previously argued that Pompliano’s suit contained trade secrets that could damage the company and help its competitors. But in a notice to the court on Monday, Snap said it was dropping the effort to keep the unredacted complaint sealed because it “has nothing to hide” since going public last month. Snap described Pompliano as a “disgruntled employee fired for poor performance” who filed the lawsuit out of thirst for publicity.
“The simple fact is that he knows exactly nothing about Snap’s current metrics,” Snap’s attorneys wrote. “He and his lawyers are — not to put too fine a point on matters — just making things up.”
John Pierce, Pompliano’s attorney, said that Snap withdrew its effort to seal the complaint because the company knew it would lose.
“This attempt to save face by Snap should serve as a reminder that no matter how big you are (or how many billions of dollars you have) in our system everyone has to play by the same set of rules,” Pierce said.
In the lawsuit, Pompliano says that on his second day on the job he met with two data analysts, who confided to him that Snapchat had “an institutional aversion to looking at user data,” and its efforts in that area were marked by “utter incompetence.”
Pompliano says he began looking into Snap’s internal methods for calculating daily active users (DAU’s), and was shocked to learn that the company relied on two crude and inaccurate metrics. The first was based on a program called Flurry, and included push notifications, which resulted in overstated numbers, according to the suit. The second was called Blizzard, and it missed older users, thereby undercounting the user base, Pompliano claims.
Snap had been claiming 100 million DAUs at the time, Pompliano alleges, even though Flurry counted only 97 million and Blizzard recorded 95 million. Pompliano became further concerned when he studied user growth over the previous nine months, and found that it the user base increased only 1% to 4% per quarter — far less than the double-digit month-over-month growth that the company was claiming, the suit says. Pompliano was alarmed that senior executives seemed to be misinformed about the data, so he “dug deeper,” according to the suit.
“What he uncovered was a wide-spread, systemic failure in Snapchat’s internal controls over its user data,” the suit claims.
For one, Pompliano says Snapchat was inflating its registration completion rate, which it claimed was about 87%. In fact, Pompliano says it was less than 40%. The company was also claiming to retain 40% of its users after seven days, when in fact the figure was closer to 20%, Pompliano claims.
Pompliano says he raised concerns that advertisers were being misled with several people, including Jill Hazelbaker, the vice president of communications. According to the lawsuit, Hazelbaker said she had raised similar concerns internally but had been ignored.
Pompliano then prepared a PowerPoint presentation on his findings for Snapchat’s senior management, including Spiegel, the firm’s then-25-year-old CEO. On Sept. 11., 2015, at the end of his second week on the job, Pompliano gave his presentation. It did not go well.
“Mr. Spiegel was inexplicably enraged throughout the meeting and refused to listen to anything Mr. Pompliano said, constantly cutting him off and summarily dismissing his points,” the lawsuit states.
According to the suit, Spiegel flipped through the presentation and summarily dismissed it, saying “Yeah I read those, it doesn’t matter,” and told Pompliano he was wasting his time.
Pompliano brought up the app’s lackluster performance in India and Spain, saying both countries have high mobile penetration and should be ripe for improved growth, at which point Spiegel made the remark about not being interested in “poor countries” and stormed out, Pompliano alleges.
Pompliano claims that Spiegel then met with two other executives and determined that “Mr. Pompliano presented a risk to Snapchat’s IPO.”
Pompliano says he was directed to create a second presentation, specifically addressing Spiegel’s questions about “friending” data. Though he says he offered a “constructive critique” of user data, and offered suggested improvements, this presentation fared no better than the first. Through an intermediary, Spiegel offered his own critique of the report, and Pompliano circulated a response, in which he “systematically dismantled Mr. Spiegel’s misguided criticism,” the lawsuit states.
The next day, he was fired. Pompliano says a security guard handed him a box and escorted him out of the building, and his phone was wiped of Snapchat accounts and data.
Pompliano has alleged that Snap executives badmouthed him to other prospective employers, making it difficult for him to find work. He has also claimed that Snap sought to violate his confidentiality agreement with Facebook by improperly asking him for a detailed Facebook org chart, a request he says he refused.
Snap has filed a motion seeking to force the case into arbitration. In its notice to the court, Snap counters that the details of Flurry and Blizzard have been disclosed to investors in the company’s prospectus.
Pierce, Pompliano’s attorney, argued that the acknowledgement demonstrates that Snap has backed off its earlier blanket denials.
“By the end of this litigation – and rest assured this is only the beginning – we will prove that every claim Mr. Pompliano has made about the long history of misconduct, going to the heart of the astronomical valuation of this now public company, is true,” Pierce said.