Snapchat Weak Ads Sales and User Growth Prompts Redesign

One of the biggest complaints users have about video messaging app Snapchat is that it is confusing.

On Tuesday, Snap, Inc. the parent company of Snapchat finally conceded that, that must change.

Still reeling following the third straight quarter of lackluster ad sales and growth in his company, CEO and co-founder of Snapchat Evan Spiegel announced on Tuesday that Snap would retool the video messaging app so that a broader audience will see it as more appealing.

The soon to be redesign is a big shift for the company, which implored investors to remain patient as advertisers became accustomed to its novel offerings and hip aesthetic.

However, since the time Snap became a public company, in the largest ever Southern California IPO, it has struggled in its attempt to show it is able to grow its user base amongst strong competition from Facebook’s WhatsApp and Instagram.

The results on Tuesday caused close to a 20% drop in shares of Snap in trading after hours.

An analyst on Wall Street said the decision to make a redesign by Snap was equal to throwing in the white towel and was clearly a strategic shift. He added that it the company realized it was not working and that the latest results prove that.

The app’s overhaul will include a feature familiar to those who use other social media apps, a timeline that is algorithmic instead of chronological.

Spiegel said Snap would personalize the Stories feed of users through leveraging the benefits of machine learning.

Spiegel did warn that the new design would be disruptive to the business for the short term, and it was not known how the core users of the app would receive it.

Snap already has seen how disruptive change is after it launched an automated advertising buying platform making it easier for brands and marketers, especially small ones to place their ads.

While ads surged following that, it also drove prices down by over 60% year to year, one of the biggest reasons why the revenue for the third quarter for the company reached $208 million or 62% higher than the same period last year, but 13% less than the $238 million Wall Street was expecting.

Snap’s losses during the quarter widened and ended at $443 million, in comparison with a loss one year ago for $124 million.

Snap boosted its number of users during the quarter to 178 million equal to an increase of 5 million but below the 8 million expected by Wall Street.

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