Snapchat’s Controversial Redesign Blamed for Loss Millions of Active Users

Roman Schwartz
August 8, 2018

Prince Alwaleed bin Talal has acquired a 2.3 percent stake in Snapchat in a deal worth $250 million (SR950 million).

Snap, the parent company of Snapchat, has announced its first decline in daily active users following a controversial redesign.

The Los Angeles-area company beat Wall Street's expectations for both revenue and losses, and its share price surged by more than 13% on the news in after-hours trading to almost $15, before briefly stabilizing around $14 - an overall gain of about 6%.

On the upside, the company reported second quarter revenues of $262.3m against analyst estimates of $249.8m, up 44% over the same period a year ago, and a loss of $0.14 earnings per share against a loss estimate of $0.18. The stock price is now $13.12 per share. Snap said new user retention for people over 35 has grown more than 8% since redesigning the app earlier this year.

More than six months later, Snap is now blaming the same design for a decline in its daily active users.

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The Los Angeles-based social network reported $262 million in revenue, beating the $250.4 million expected by analysts, and lost 14 cents per share. It was the first full quarter that all users were transitioned to the redesigned Snapchat, which rolled out this year. CNN reports that this is the first time Snapchat's user count has dropped since Snap Inc went public.

Advertising revenue is up 48 percent year-over-year as well, making the platform all the more enticing to the potential advertiser. Snap declined to estimate user growth for next quarter, but noted that third-quarter earnings have historically "trended down" for the company.

"We have been working hard to iterate and improve Snapchat based on the feedback from our community", Evan Spiegel said on a call.

Snap said ending leases in Venice, California, to consolidate offices a few miles north in Santa Monica cost it $3.9 million in the second quarter and would result in total expenses of $25 million to $45 million in 2018, mostly in the current quarter. Snap lost $353 million (roughly Rs. 2,400 crores) in the quarter, or 27 cents (about Rs. 18) per share.

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