Summits Yellow

Snap shares suffer as Snapchat redesign slows user growth and revenue

Tyrone Stewart

SnapShares in Snap took a big hit after it revealed that its much-maligned Snapchat redesign resulted in the company falling short of expectations on both revenue and user growth in Q1 2018.

The firm took a stock price hit of as much as 17 per cent upon reporting a revenue of $230.7m (£169.4m) for the quarter which, despite being a 54 per cent jump from the same period last year, fell below the around $245m estimated by analysts.

On the back of the poor revenue performance, Snap suffered a net loss of $386m – which was 83 per cent down on the $2.2bn for Q1 2017 but up on the $350m hit it took in Q4 2017.

The quarter also saw user growth numbers fall below estimates with Snapchat only adding 4m daily active users (DAUs). This took its DAU base to 191m, despite being expected to reach around 194m. In the previous quarter, Snapchat added 8.9m DAUs.

“Despite trying to diversify its revenue stream with its second generation of Spectacles, reducing some of its workforce and optimising its infrastructure costs, Snap doesn’t seem to be able to satisfy investors. Shares fell following the earnings result, which revealed that the company missed the mark on both user figures and revenue,” said Yuval Ben-Itzhak, CEO at Socialbakers. “The redesign at the end of last year, which resulted in celebrity outcry and a petition on asking Snapchat to roll things back to the old format, seems to have alienated users and set Snap back a step as they try to attract more marketing budgets.  

“Snapchat is also still a long way behind its rivals Facebook and Instagram in terms of advertising dollars and audience size. Instagram Stories has 300m daily active users and as Facebook's Stories products grow in popularity, marketers will have fewer reasons to direct their ad spend towards Snapchat. Advertising revenue for Snapchat grew 62 per cent year-on-year, which demonstrates that recent changes to the platform in favour of marketers have somewhat paid off. However, Snap is still not yet attractive enough to marketers at the scale it must be to support its revenue goals.”