SOURCE: SNAP Interactive, Inc.

Snap Interactive, Inc.

January 26, 2016 08:30 ET

Letter to SNAP Interactive Inc. Shareholders From Its CEO

NEW YORK, NY--(Marketwired - Jan 26, 2016) - Snap Interactive, Inc. ("SNAP," the "Company," "we," "our" or "us") (OTCQB: STVI) today issued the following letter to shareholders:

DEAR SHAREHOLDERS,
With the New Year just beginning, we wanted to look back on some of the many exciting developments that took place at SNAP in 2015. Overall, this was a transformative year for the Company as we continued to receive accolades for The Grade, our female-friendly dating app, and launched a strategic review designed to determine how to best position the Company to unlock shareholder value.

LEADERSHIP
One of the first changes made as part of the strategic review was to appoint me, Alex Harrington, as CEO in October. Before I joined SNAP nearly two years ago, I had several roles growing and operating entrepreneurial digital businesses in the dating and media industries. I was the CEO of a venture-backed mobile dating pioneer called MeetMoi, which was sold in 2013 to Match.com. Prior to that, I served as SVP of Strategy and Operations at Zagat Survey, the restaurant and travel guide company, where I led a team that revamped the digital business before the company's ultimate sale to Google.

Also in October, SNAP's founder and Chairman of the Board of Directors, Clifford Lerner, assumed the newly-created role of President of The Grade. In his new role, Cliff is responsible for scaling The Grade's user base, overseeing its growth and driving market penetration. His track record in developing early-stage businesses will be invaluable as The Grade gains popularity and moves towards monetization.

In December, Neil Foster was appointed to the Company's Board of Directors. He brings more than 25 years of executive experience in various strategic, operational, financial and corporate development roles in the media sector, spanning traditional and digital media, including at companies such as Take-Two Interactive and Sony Music Entertainment. Neil joins Dr. Steven Fox as SNAP's second independent director. Building our corporate governance practices by adding industry leaders of the highest caliber to our Board of Directors is central to our goal of listing on a national securities exchange.

STRATEGIC REVIEW AND NEW PORTFOLIO STRATEGY
The strategic review process also engendered a new business strategy for SNAP, centered on our large 30 million user database. We believe this asset has been underutilized until now, and that the best way to exploit the database for its full commercial potential is to build a portfolio of products. Having multiple products under one roof enables us to cross-sell users of one product to another, with the potential for a step-change improvement in revenue.

Over the long term, our intentions are to grow our portfolio both in-house and through acquisitions. In the short term, our goal is to replicate the AYI product infrastructure and introduce it to the market under a new brand, addressing a different but overlapping audience. This approach allows us to launch the app at little incremental cost to the Company. In fact, we've already started the planning process for the new product introduction and we expect a launch this summer.

THE GRADE
Our newest product, The Grade, has received significant media attention from top-tier business and lifestyle publications over the past year, including The Wall Street Journal, Cosmopolitan and Men's Fitness. Beyond interest from the press, The Grade also achieved several important accomplishments in 2015. Most recently, it was featured as the top trending search result in the iTunes App Store on November 29, leading to it receiving its highest count of downloads ever in one day.

We are constantly improving The Grade's user experience, with the mandate to create the best interactive dating environment for women. In October, we launched the 'Peer Review' feature, which allows users to provide direct feedback on online and offline experiences with other singles on the app. We recently announced the launch of a best-of-breed Apple Watch app, offering users access to The Grade on an additional cutting edge platform. We also signed Lauren Urasek as a brand ambassador for The Grade. Lauren was named the most sought-after woman in New York City by New York magazine, and as a prominent face of online dating she is partnering with us to help raise our profile and drive user growth.

The Grade is targeting what we believe to be a lucrative opportunity - to seize the unclaimed number two position in the market to Tinder, the leading mobile casual dating app, and we're very excited about its progress to date. We're building The Grade on a lean budget of public relations and word of mouth, which has so far has created a great deal of visibility for the brand and more than 100,000 downloads. Industry observers valued Tinder as a billion-dollar enterprise before it even had a dime of revenue, and we look forward to capitalizing on the positive sentiment in the mobile dating app category that exists today.

AYI REBRAND
As we work towards building and scaling The Grade and executing our portfolio strategy, we believe rebranding is the simplest and fastest way to reinvigorate growth in the AYI business and recapture a large population of users in our database that have churned out. This relaunch includes a new brand with a refreshed look and feel, and some modest functional improvements coupled with an aggressive win- back strategy. We also anticipate that the new brand will lower our cost of acquisition for new users as well. This rebrand is already substantially completed and we expect the relaunched AYI to go live in the first quarter of 2016.

EXPANSION
International
As we've discussed before, approximately half the market for the interactive dating industry is outside of the U.S., and AYI has historically been a global product. Nearly 50% of revenue comes from outside the U.S., but we've never invested in localizing the product to target international markets. This is changing with the launch of foreign language translation capability now on both Android and the mobile web, with more platforms to follow. We've started with Spanish translation and are exploring other languages, such as Portuguese, to build a revenue footprint in high-potential Latin American markets.

Mobile
The world has changed since my last company, MeetMoi, was one of the first to bring online dating to mobile phones in 2007. Now, mobile represents approximately two-thirds of user activity in the interactive dating industry. Making mobile a top priority at SNAP isn't a choice, it's a necessity. Accordingly, we've been reengineering our Android and iPhone apps to dramatically reduce our development costs going forward, putting our mobile platforms as the centerpiece of our product innovation. We also anticipate migrating a higher proportion of marketing resources to mobile platforms during 2016.

Acquisitions
On the acquisitions front, we expect to build most of our portfolio products in-house in the near term, but we believe that acquisitions represent an important long-term growth opportunity for us as well. The interactive dating industry is incredibly fragmented, with some 8,000 competitors according to some estimates. Industry leaders have emerged, in part, through acquisitions.

As an example, Match Group's growth is due, in part, to acquisitions of companies such as PlentyOfFish. However, while most of the sizable acquisition targets that would meaningfully grow a company the scale of Match Group have already been acquired, there are many smaller companies that would be good candidates for SNAP to acquire. With a public stock as a currency, a scalable technology infrastructure and a large database to cross-sell into new brands, we are positioning SNAP as an effective industry consolidator.

CONCLUSION
Looking back on 2015, we're beginning to take the necessary steps to change our business and emerge as a leader in the online dating industry. All of the initiatives I've outlined here will be reinforced and supported by initiatives at the corporate level, such as adding new talent to the executive team and Board of Directors.
 We believe our new strategic direction will enable us to accomplish our medium- and long-term goals of realizing appropriate equity appreciation and value for the Company and listing on a national securities exchange.

I look forward to leveraging my financial, strategic and operational expertise to help SNAP unlock value for shareholders.

Thank you,
Alex Harrington
Chief Executive Officer Snap Interactive, Inc.

Forward-Looking Statements:
This letter contains "forward-looking statements." Such statements may be preceded by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company's control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with general economic, industry and market sector conditions; the Company's ability to institute corporate governance standards or achieve compliance with national exchange listing requirements; the Company's future growth and the ability to obtain additional financing to implement the Company's growth strategy; the ability to increase or recognize revenue, decrease expenses and increase the number of active subscribers, new subscription transactions or monthly active users; the ability to enter into new advertising agreements; the ability to diversify new user acquisition channels or improve the conversion of users to paid subscribers; the ability to anticipate and respond to changing user and industry trends and preferences; the intense competition in the online dating marketplace; the ability to release new applications or derive revenue from new applications; and circumstances that could disrupt the functioning of the Company's applications. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission ("SEC"), including the Company's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov.


All forward-looking statements speak only as of the date on which they are made. The Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement was made, except to the extent required by applicable securities laws.

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