Snapchat's High-Stakes Clash With Its Neighbors on Venice Beach

Ever since it was a tiny startup, Snap, the parent company of Snapchat, has been based in the quirky, bohemian Los Angeles beach town of Venice. Now, the social media app maker employs almost 2,000 workers and is about to become a publicly traded company. This week, Bloomberg Technology's Sarah Frier and Aki Ito visit Venice to hear from longtime residents and business owners, some of whom worry they're getting priced out of their neighborhood. They also speak to community members who say the company is doing its best to offset the pains that economic success can bring. As Snap prepares for its March IPO, which will turn some of its young employees into overnight millionaires, tensions are reaching a fever pitch.

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:04):
Way down. So walking around Venice, the beach town in
Los Angeles, not the tourist destination in Italy, you see
the most eclectic mix of people. About twenty years ago
you could actually have parrots and snakes on you and
take photos and that sort of change. They didn't want

(00:25):
a lot of wildlife on the borderwalk. But now you
have tattoo artists, you have Hanna tattoo, t shirt sales people, psychics,
palm readers, dancers, you have. That's decent Moore, his essential
character for today. He's lived in Venice for more than
twenty years now. It's a normality and that's part of
the culture here. And they're all over from the you know,
all different parts of the world. You know, musicians that

(00:47):
want to get a break. Yeah, Janis Joplin walking on
the streets, Jim Morrison doing poetry back in the day.
I mean, you have that creative spirit and you don't
know who you're standing next to that could be the
next rock star. But lately new elements have joined this quirky,
vibrant mix. So this is now Snapchat. The white building
across Snapchat. This blue building right here is Snapchat that

(01:10):
used to be an apartment complex for Ages. I've drove
by last night and there were you haul moving bands
moving residents out of these apartments. So this literally has
happened within the last month. That's Jason talking with Jim Rob,
another concern resident of Venice. Jim's lived here for even

(01:31):
longer than Jason has. Since. You see corporate badges, clip
to belt loops, private security guards patrolling public sidewalks, homes
and offices that changed hands recently to a single owner
that always keeps the blinds closed to keep their work
a mystery. Some locals are terrified that their quirky, bohemian

(01:54):
paradise is turning into the sterile corporate campus a beachfront
office park for snap app, which is a parent company
of the social media app Snapchat. And Jason and Jim
were concerned enough to invite us to l A to
see what's going on. Hi, I'm Sarah Fryar and I'm

(02:18):
aki Ito, And this week on Decrypted, we're taking you
to the historic beach town where snap is rapidly expanding.
You'll hear from residents, business owners, politician, and this being
southern California, maybe even a celebrity or two. Yeah. All
these people who are mad, sad, anxious for a variety
of reasons we'll get into today. And people in Venice

(02:40):
worry it's just about to get a whole lot worse
with Snaps. I p o plan for March that's going
to make a lot of money for its young employees.
So what is Snap's obligation to this beach town and
what can they do to try to fix this paranoia
and mistrust with their neighbors. Stay with us to find now. So, Sarah,

(03:15):
you and I visited Venice Southern Week. It was a
gorgeous day. I was sweating in this long sleeve shirt
I'd worn from San Francisco. And what struck me as
we walked around with Jason and Jim was it's not
like we're talking about this gigantic building going up. It's
really different from what we see here in Silicon Valley.
Like Google has this whole campus in Mountain View, where

(03:37):
Twitter has their headquarters in the skyscraper in mid market
San Francisco. This is a bunch of tiny buildings, in
some cases just one or two floors, scattered all around
the most touristy and residential parts of town, right on
the beach in many cases, and these buildings aren't labeled
with the Snapchat logo that yellow and white ghosts we've

(03:59):
all scene, or even the company's name. As a tourist
visiting Venice, you might not even know that Snap was
there unless you knew what you were looking for. Like
the presidents of security guards up front wearing park ranger hats,
and the vans that are shuttling their workers to and
from snaps various buildings, and the fact that they're blinds

(04:20):
are all drawn when this gorgeous beaches right in front
of them. Snap is known for its secrecy, but a
lot of residents don't know what they do and don't
know how to feel about them, and the lack of
transparency everywhere just made it to the point where it's like,
all right, if we want to find transparency, let's at
least speak to the people in the community. Let's hear
their voices, and then let's do our investigation and see

(04:42):
what's actually going on with the zoning, going on, with
the real estate going on with it all, because there's
a lot of opinion, there's a lot of rumors, but
actually to uncover and see what they're doing and what's going. Yeah,
the destic time and we're Jason was Paris Hilton's manager
for ten years, and now he represents people who are
professional video game players, which, by the way, is a

(05:04):
totally fascinating world of its own and something we're going
to feature on this podcast in the very near future. Anyway,
that's all to say, Jason is not your typical local
community activists. He said, he's just kind of stumbled into
all this about a couple of months ago when he
saw Evan Spiegel, who's the CEO of Snap, on the
roof of the art gallery next to his office. Jason

(05:26):
worried that if Snap was buying that art gallery, his
office might be next. So that's where you saw Evan
walking up there on the roof here, Yeah, he was
up on the roof there. How did you tell with him?
You can see where's jeans, white shoes, white shirt, and
he looks like Evan Spiegel. You pretty much so has
like if you brand yourself, I mean, Zucker Works got

(05:46):
a hoodie. Evan's got his white shoes and white shirt
and you know they all kind of jobs had his turtlenecks,
so you kind of know what they look like. But
maybe Evan Spiegel, just like Art, Jason and his fellow
residence are not a sense sure what SNAP owns, but
they're trying to connect the dots like d I Y detectives.

(06:06):
On their walks around the city. They're noting where snaps
fans are parked and SNAP security guards are placed, and
they're digging through the city property records to see if
they can find hints of what SNAP owns. Here's Jason
talking to a local business owner, Patrick Liberty, who we
ran into on the Venice boardwalk. Well, they owned Gingerbreight Court.
Now they own it. Yeah, they bought it from Yeah,
and they're slowly going to take everybody out. So the

(06:28):
back has already been leased. You sure they bought it, Yeah,
they bought it. Who told you that it's under the zoning?
The addresses match other addresses, nobody does, and they and
they bought and they bought it when the Snap was
open back in the day. So it's probably one of
the first purchases that they did with anybody knowing. Nobody
knew that. I heard that they were behind this and

(06:51):
they building the building. They are and they found out
and that kind of threw a Crowbar. We're going to
go speak with Martha Cherish, who's the one that kind
of spearheaded to stop. It's that, I guess they The
Gingerbread Court they're talking about here is one of the
most famous buildings in town. It's right on the boardwalk,

(07:13):
this brick structure, originally owned by Charlie Chaplin. It's got
a short alleyway lined by small shops. Jason and Jim
showed us a print out of a spreadsheet and a
map they've compiled with twenty buildings that they think are
currently owned released by the company. We ran this list
by a person familiar with SNAPS real estate holdings, who

(07:33):
told us it contained several errors, but that person did
confirm that Jason was right about the ginger By Court,
at least the part that's office space. As we're walking
down the boardwalk, we talked to some artists around the
same age as SNAPS employees. They sleep on the beach,
they paint on scrap wood, They sell their art on

(07:56):
the boardwalk right in front of SNAPS offices. But they
said the employees never stopped to buy their art or
even taking interest. They said that they don't even say Hi.
Patrick Liberty. That business owner who we met earlier told
a similar story. He runs Venice Liberty, a T shirt
shop on the boardwalk, and he lost his parking spot

(08:18):
when Snap occupied some space nearby. He's tried over and
over to get them to make an exception, at least
for a long time resident. I wrote him a letter,
gave a T shirt. So I go up there. You
can't even ring the buzzer up at sixty four marketing
men without two guards on either side of you think,
and I help you. And I said, well, I got
this letter, and I want to I could never get pasted.

(08:41):
The first time I gave it to security guard because
that's all I could get past. And the second time
I come back with another letter, you know, and even more.
And by the third letter in the T shirt, I'm going, hey,
look man, you know it's just a parking spot. You
know you've got lots of them. I live here, and
you know you came and took it, took it away
from his beat. You know, I got mad at her.
I could never The only person I ever solways the

(09:02):
security guard, these guys walking around in khakis. That's as
far as I ever got. You cannot email and you
can't call him, you can't see them. Patrick said that
since Snap moved into the area, sales at his T
shirt shop haven't grown enough to offset the increase in rent.
We met up with another guy who got priced out

(09:22):
of his storefront altogether. His name Cesario Montano and goes
by the nickname Block. Snapchat just bought this whole street up.
So like my shop was right in that red building,
that's an historical building. But the rent is going crazy
around here. You know, Block closed down his own shop
about a year ago. According to the real estate brokerage

(09:43):
c b r E, asking rents for off space in
Venice have more than doubled just over the last three years.
You know, Snaps bringing in this over abundance of wealth.
Nobody could compete with billion dollars. How much money did
they make? How much they're worth? Billions? Right, so they

(10:04):
got a few money, they're coming over a few. Here's
three million. Get out. I don't care. I want it,
I want the street, I want it, I want silicone beach.
The funny thing was, as we were talking to Block,
he saw one of his old friends and called her over.

(10:27):
She had just been hired by Snapped, improved the company's
relationship with the community. But on top of being media shy,
Snap is in what's known as a quiet period ahead
of its March i p O, which means it's not
supposed to be publicly commenting on its business. Once Block's
friend figured out who we were, she excused herself and
walked away, saying she couldn't talk to the press. And

(10:50):
by the way, this i p O is going to
bring even more money into the community. To Evans, Spiegel
alone may make more than five hundred million dollars just
from the i p O, and the early employees and
executives of the company will soon finally be able to
cash out on their stakes. As we just heard, Block
is suspicious of all this money. But it's not like

(11:13):
he's not used to hanging out with rich people. He's
a photographer and works a lot with the music industry.
And you just kind of gradually mentioned to us at
one point that he was hanging out with Brihanna at
a Grammy's after party the night before. In Venice, people
are proud of their local stars. They'll say, that's where
Robert Downey Jr. Has a house, That's where Arnold Schwarzenegger

(11:35):
used to work out. But there's something about these tech
guys that rubs them the wrong way. They don't want
to talk to you in the local bars anymore. They
don't really associate with you if you're not if you
don't have tech vocabulary, they don't. They're like, you're a local,
You're look at the way I addressed you know, I'm
from around here. They have nothing to say to me.

(11:56):
They're like, I have nothing in common with you. I'm
here to do my tech job. And that's kind of
the attitude. Our next stop on our Whirlwind tour was
a spiritual community center run by the actor Andrew Keegan.
If you need a visual, this is the guy who
played Joey, the antagonists in the film Ten Things I
Hate About You. There's obviously so many different issues going

(12:19):
on in our community, and again, my focus here in
this space is really bringing community members together that are
the ones that are like us in the middle of
all of this, and we really would love to see them,
you know, put some of their resources and really that
integration idea of involving their employees and getting to know

(12:41):
community members, you know, um, not just walking by them
half in jest. He also had one last tidbit of advice.
Snapchat just needs to throw us a big party. That's
the solution, I think from this sponsor a big party,
I can understand the sentiment. I mean, I remember as
a kid it going to Venice with my family and

(13:01):
seeing all the culture and the skateboarding and the art,
getting lost in the crowd rollerblading. Yeah, this was my
first time in Venice, but I was completely swept up
by its charm to The tallest building we saw was
maybe four stories high. The beachfront was lined with mom
and pop stores, not a single brand like Starbucks on

(13:22):
the boardwalk, more than a couple of whips of pot.
There's something really sentimental about Venice. And then here comes
this red hot startup making an app that a lot
of the residents don't use and don't understand, buying up
or leasing what seems like everything that becomes available. Run
by this twenty six year old rich guy. It's pretty

(13:42):
symbolic of this clash of history with a new hot thing,
which is ironic because presumably it's exactly this renegade artist,
independent skateboarding hip culture that Venice has preserved that attracted
Evan Spiegel to Venice in the first place. He went
to college at Stanford, right in the heart of Silicon Valley,

(14:03):
and yet he left all those sprawling corporate campuses in
VC firms for Venice, where he's had to buy and
least these tiny buildings piecemeal. Evan Spegel even talked about
it in a video of the company made for investors
for the I p O. It was filmed in the
Blue House on the Boardwalk, right where the company got
its first office. He and co founder and CTO Bobby

(14:25):
Murphy exude pride and nostalgia for those early days when
they first decided on Venice. I can remember when we
first got this building as our office. There were eight
of us, and you know, our dream had always been
to have an office on the beach. You right here,
you know, there used to be a table, and this
is where we built stories and where we planned the
evolution of the product that the world has experienced in

(14:47):
the last few years. It's pretty surreal being here. I mean,
I can distinctly remember that the first day that myself, Evan,
David and Daniel came here to check out this place,
and we thought it was pretty big for what we
needed at the time. I think within just a few
of months he filled this place of the brand of
about people. There's just a really, really exciting time that
was the period of this company. To be fair to Snap,
they're not the first to spark change in Venice. It's

(15:10):
been a long time coming. Google came even before Snap,
taking up two blocks of buildings maybe a ten minute
walk inland from the beach, and there's Abbot Kenney Boulevard
which has all these fancy shops and restaurants on it.
This is what Lulio told me. He works for real
estate brokerage in Venice. Um, so Snap's not new, you know,
they're just here with Google replacing some things that were

(15:33):
here before. Um, it's just that. Um, the the people
who seem to have an issue with what's going on
with prices increasing on real estate, prices increasing for rent,
the lack of commercial vacancy space to put a office
or a restaurant or retail space. You know those folks. UM,

(15:58):
I don't think anything would ever make those folks happy.
As Snap rapidly added more employees, it could have looked
to other beach towns in l A. There's Santa Monica,
on one side, which is way built up, and there's
Playa del Rey where Google and Yahoo have campuses. There's
tons of office space there too. Yeah, those areas welcome

(16:20):
tech companies with open arms. And I really think of
any other town and city desperate to attract jobs in
the face of a changing economy. That's something that Mark
Ravick talked about when Jason and Jim took us to
go meet him in a cafe. Mark is running for
a seat on the Los Angeles City Council to represent
Venice and its surrounding neighborhoods. The clash between local residents

(16:44):
and Snap has become a key issue in the race.
The primary takes place on March seven. My sense is
that they are simply an add on to the UM
direction that at the Venice and this entire coastal area
stretching all the way, oddly, stretching all the way from

(17:04):
Santa Monica down to Elsa Gundo, in this marriage of
Internet marketing and and and in film and TV content UM.
And it's really for me exciting to see. And I
don't see a downside UM at all, because one of

(17:26):
the things comes when comes with it is a lot
of discretionary dollars on behalf of those employees, and they're
spending it to boost the economy in really remarkable way.
This was not what Jason wanted to hear. He showed
Mark that map of all the places you think snap
owns or is trying to lease. Mark countered that those

(17:48):
twenty or so properties are infinitesimal compared to the total
real estate in Venice. And that's when things got heated.
It's all right for you to have an office there,
but not all all right first up to to have
an office there, I wouldn't be able to have an
office with them. No, no, no, you're not following you.
It's okay for you to have an office there, but
not okay for Snapchat to have an office there. Why

(18:08):
is your office more important than their office? I guess
it's not good because it's your office, I guess. I
guess it's not a good thing to be a resident
of Venice. When you leave, somebody will, you know, rent
your place and they'll be a resident. I'm being the
devil's advocate here, But isn't isn't What you're rejecting to
is change and the fact that change might affect you

(18:30):
as opposed to the use because office to office, why
can't I use it? Why? You know, why should I
be pushed out? Um, because we do exist in a
capitalist society and they'll pay more than you with Again,
you may not like that, but that is what's what's

(18:50):
going on. So how are you as a council member
to be to represent us with that attitude? Gonna get
support from residents saying hey, deal with change. I may not.
You know, one has to say what one believes. Then

(19:13):
we hopped into Jason's Thunderbird and we drove to Robin
Rudis Sill's house on the beach. Robbin's also running in
the city council race, and we've recounted the conversation we
just had with Mark drivek No, I don't think any
anybody in Venice grey except well yeah, but um, you know,

(19:33):
it's it's not really a stimulus because um, it's taking
uh some some of the people have the higher paid jobs,
you know, it's not a sort of the medium or
lower paid jobs that we would probably need here in Venice. Also,
they're getting this huge tax um credit from the city,
so they're not even getting a stimulus to tax business taxes.

(19:57):
Um really so just come in here, have all these people,
you know, drive up the prices of our homes, take
our residential units and turn them into offices. And we're
not talking just a few, We're talking a lot of
a lot of that has been done. And I wouldn't
say that's the gift at all. That's had a very

(20:20):
detrimental impact on Venice because losing housing has caused people
to have to move out of Venice that thought they'd
be here all their lives, you know, so being they're
being forced out because of this. This point came up
in our conversations with a lot of other residents too,
who think snaps breaking the law by having offices in

(20:42):
residential areas. But here's what the real estate agent LU
said about that. You know, the majority of the places
that these folks have taken have been you know, commercially
zone properties, and if the closest thing that they would
be too, you know, residential, would be live workspace in
a commercial zone that just happens to have the use

(21:05):
code of live work I'm not an attorney, but you know,
if you if you if you look at the letter
of the law on the way that you know that
code is loosely written, it can be interpreted several ways,
and the community members who actually have interactions with Snap
employees do have some pretty nice things to say. Here's

(21:27):
Kristen Poulia, the CEO of ps Arts, a local nonprofit
supporting the arts for kids. We work with many corporate
partners in our schools, and I don't think I've had
nearly the amount of face time, nearly the amount of
volunteer activity that Snap has has put forward. And then

(21:48):
on top of that, the financial commitment has been so thoughtful.
You know that they come to us as the experts,
They say, what is it that the kids need, what
is going to be the best for this community, and
they let us design it. So I think they have
been incredibly responsible UM contributors un characteristically so. She talked

(22:12):
about Snap employees painting with the kids, sticking around longer
than necessary, coming up with ideas for new programs. And
here's Barry Cohen, the principle of a local elementary school,
you know, dealing with some other companies nearby and trying
to scare funds from them for different programs. It's been
a lot more red tape. UM. I feel like with

(22:33):
snap it was. They said, this is a good thing.
We want to do it um and they did. At
the end of the night, Jason and Jim organized a
cocktail hour for us at a bar next to Jason's office.
It was called the Canal Club. He had been telling
people all day that they could show up if they
wanted to talk to a couple of reporters. We didn't
know what to expect. They took us to this room

(22:56):
in the back and I counted at least forty people
in there, everyone from a young mother holding a baby
to a couple of people who looked old enough to
be grandparents. They sat around a few big tables that
were pushed together, and when the seats filled up, more
people crammed into the back of the room standing up.

(23:17):
Yeah is you could just give your name and say
why you came and what's going on in your world.
We passed around the mike for the people who wanted
to talk. The real reason, the real reason all these
people are here, The real reason all these people are
here is because they're all a bunch of freaks living

(23:37):
inventor speech and they're afraid that all these all these
strike people, all these streak people are gonna come in
and stir up the peat patch and level it all out.
I mean, just look around. You can see they're all
a bunch of freaks. That's what that's that's the bottom
line right there. You want to be a freak and
stay a freak. That's it. We also heard from people
like Kelly Blair. She lives in the house right by

(23:59):
a building that's SNAP recently moved into. There's like two
hundred people a day going in that building. That cannot
be legal, Like it cannot it can't be. And so
my um up, my driveway is often being used as
their uber stop or their security guard stop, or what
happens on Ocean Front or on Speedway, which is a road,
not a parking lot. They just line up their cars

(24:21):
at six o'clock, five o'clock, their little shuttles that take
them everywhere, and they park they park on on Speedway.
And I have got into another point that came up
a lot was run ins with the security staff patrolling
Snaps various offices. People just don't like being looked at
and judged while they walked down their familiar streets. And
what we also heard was the sense that Snap was

(24:43):
kind of getting to operate under a different set of
rules in everyone else. I just want to add one
more thing. All io companies in the city get an
eighty percent business tax break. We don't us individual Mama
Pop personally. People in this room own a business wow,

(25:06):
and we don't get a text. But just to say
whatever incentive may have just for our listeners, I was
like probably three quarters of the room okay. So that
leaves us here with two very different sides to the story.
One of the residents upset with Snap and the other

(25:29):
of people that really think Snap is doing its best
to offset the very real pains that any successful growing
company can bring to a relatively small neighborhood. And like
a lot of conflicts, the two sides aren't even operating
with the same set of facts. And we heard actor
Andrew Keegan bring this up earlier. But residents were just

(25:50):
clamoring for a form for them to actually talk to Snap.
I think that's why so many people showed up to
our cocktail hour. A couple of people even thought we
were representing the company. We just had to keep reminding
them that we were journalists. It's probably because the residents
weren't getting any information from Snap that their concerns had

(26:11):
escalated into this full blown crisis, that they had to
rely on people like Jason and Jim digging into property records,
passing along rumors, some of which were true and some
of which were not. What you don't know is so
much scarier than what's out there in the open. We
heard their residents use words like sneaky and secretive a

(26:31):
lot on our trip, and it did remind me of
my past dealings with the company. I remember the very
first time that I went to Venice to visit them,
I wasn't even allowed inside the offices. We had our
meeting on the boardwalk. In the meantime, this could become
a real business liability for Snap. In their filing for

(26:52):
their I p O, they do mention a risk factor
that because they don't have a corporate campus, it may
actually affect their their morale among employees. And then there's
this whole issue of future expansion. They could double, triple,
quadruple in the coming years if you look at the
growth of Facebook and Google and other companies that came

(27:13):
before them, that's certainly what they're expecting. Yeah, it's got
to be pretty hard for Evans Spiegel to run this
nearly two thousand person company this way, with employee spread
out across an entire beach town having to be shuttled
from one office to another instead of getting this chance
to all be together in a single headquarters. Snap might

(27:34):
get something like that eventually, and recent reports have come
out about their interests and expansion in nearby Santa Monica,
which would certainly give them more space. That's it for
this week's episode of Decrypted. Thanks for listening, tell Us

(27:55):
has the tech industry Gentrified. Your community record as a
voice memo and send it to us at Decrypted at
Bloomberg dot net, or you can write to me on
Twitter I'm at Sarah Fryar and I'm at aki Ito seven.
You could subscribe to Decrypted on iTunes or wherever you
get your podcasts and leave us a rating and review.

(28:16):
That helps us make our show better and it also
gets our podcasts in front of more listeners. This episode
was produced by Pierre get Kari Magnus Hendrickson and Liz Smith.
A very special thank you to reporter Shelley Hagen who
helps so much in the reporting and the research for
today's show. Alec McCabe is head of Bloomberg Podcasts. We'll

(28:36):
see you next week.