How to Build a Data Center Without Making Enemies

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Welcome to Tech News Briefing. It's Tuesday, September 8th. I'm Belle Lin, a reporter for the Wall Street Journal Leadership Institute. The social media company Snap is gearing up for the launch of new smart glasses later this month, and at a price tag of nearly $2,200, they're not cheap. We explore why Snap is making such a big bet on the glasses, even though not everyone is bought in.

Then, the good news about data centers is that there are ways to build them with people and communities in mind. The bad news is that's not happening right now. We dive into some of the ways that tech companies can develop data centers that won't alienate communities, and why there's still such a long road ahead.

But first, even as SNAP struggles with profitability, the company's CEO, Evan Spiegel, is doubling down on its foray into smart glasses. That has led to concerns from investors and SNAP employees that the move may not pay off. WSJ Deputy Media Editor Jessica Toonkel is here now to discuss the turmoil inside SNAP and why its upcoming smart glasses launch is such a big test for the company. So Jessica, why is SNAP CEO, Evan Spiegel, making such a big bet on smart glasses?

Jessica Toonkel (1:58)

So Evan really sees these specs as like the future after the phones. These are better than phones, he believes. He thinks they allow users to interact with the physical world in a way that you can't with a phone because, you know, you're looking at it or you have it up to your ear.

He describes his kids playing in the backyard and being able to play laser tag while they're wearing these specs. So he thinks it's just a more interactive, natural way of being present, but also being able to do all these other things. So it's a big bet for him and for the company.

Belle Lin (2:34)

And it's interesting that he personally believes in the sort of future of smart glasses, but then he's also organized his company around this big gamble as well. How has he done that inside SNAP?

Jessica Toonkel (2:47)

So he has been spending more time as we've reported and he's allocated more resources. He allocated about 500 employees, which is about 10 percent of the company, to work on specs according to our sources.

And he recently set up a subsidiary just for specs. So a lot of people believe that ultimately if this takes off, he could spin it out to be a separate company. But right now, Snapchat is funding specs, so a lot has to happen for that to work out.

Belle Lin (3:20)

It seems like there's no shortage of critics and doubters out there. Why are some of SNAP's investors, analysts and even some of their own employees concerned that this bet won't work out?

Jessica Toonkel (3:33)

I think if you take a step back and look at SNAP as the company, the stock is down more than 30% this year, it's down around 90% since its pandemic highs.

It has not had a profitable year yet. So with that backdrop, a lot of people are asking, why are we going into this whole new thing? Why are we launching this new hardware business? This is a very expensive product, it's $2,200.

Are people going to pay for it? So there's just a lot of questions if this is a bet that Spiegel should be making now, given everything going on. Internally, leaders as well as other executives within the company have told Evan, they've expressed their concern that he's been spending more time with specs at the cost of Snapchat, which is the core product. There are people who believe that the Snapchat product could be more competitive if he spent more time there.

Belle Lin (4:33)

So, what's really at stake for Snap? I know you just described the company's resources being poured into this area, but does Snapchat continue to fund the company if specs doesn't work out? What's really the big challenge here?

Jessica Toonkel (4:48)

We reported that they had looked at outside funding to fund specs. That didn't happen. I don't know why that didn't happen, didn't work out.

But the question is, how long can Snapchat fund this business if it's not going to make money anytime soon? Evan Spiegel himself has said he doesn't think there will be mass adoption of smart glasses for a decade. So there are a lot of questions for this business.