Even Snap Inc. had to admit that its redesign wasn’t panning out the way it had hoped. And now that first-quarter earnings are in, the proof is in the numbers.
During the first three months of the year, the ephemeral messaging company pulled in $230.7 million in revenue, losing 17 cents a share and falling short of the $244 million that analysts had expected.
In Snap’s press announcement, the company called out two factors: “seasonality and our redesign.”
By chief financial officer Drew Vollero’s estimation, the punishment will keep on coming during the second quarter. “We are planning for our Q2 growth rate to decelerate substantially from Q1 levels,” the cfo said, “with growth in auction impressions, partially offset by pricing for both Snap Ads and Creative Tools.”
The stock took a nosedive in after-hours trading, dropping as much as 17 percent to $14.13. It’s a sobering fall — its February high clocked in at $21.22.
The Venice, Calif.-based tech company has shed workers through no less than three layoff rounds this year alone. In March, during the latest, management cut 100 employees.
But not all of the Snap news was bad. Snap cut its net loss 82 percent year-over-year, going from $2.2 billion to $384.2 million. And Daily active users are up 15 percent compared to the same quarter last year, going from 166 million to 191 million. Too bad most of that growth happened before January.
In fact, this quarter only brought in four million new users, compared to nearly nine million in the quarter directly preceding it.
The company has had a tough time since its March 2017 $29 billion initial public offering. Snap’s reality just hasn’t lived up to the growth expectations of such a high valuation. The redesign, unveiled in November, aimed to improve the user experience by separating shares from brands and media away from those of personal contacts. Some reviewers and analysts were optimistic about the changes at the time, and the company even had a strong fourth-quarter 2017.
A lot has happened between now and then, though.
The redesign’s official rollout in February was widely panned by reviewers. People took to other social media, like Twitter, to throw shade at Snapchat — including Kylie Jenner, who basically trashed the platform to her 24.5 million followers. The company lost $1.3 billion in market value essentially overnight after she posted. Users found it so confusing and frustrating, some even started a Change.org petition to beg for the old design. To date, there are more than 1.25 million signatures. Thanks to the backlash, analysts like Citigroup’s Mark May downgraded the stock from “neutral” to “sell.”
Evan Spiegel, Snap’s founder and chief executive officer, stuck to his guns. “We’d been thinking about the redesign for a really long time because we were frustrated that when you looked at [Snapchat], both sides looked the same,” Spiegel explained at a Goldman Sachs conference in February. “We’re excited about what we’re seeing so far. Even the complaints we’re seeing reinforce the philosophy. The frustrations we’re seeing really validate those changes.”
Whether that logic tracks may not matter much anymore. Faced with a downslide this extreme, the company will have to reevaluate its tactics, if it hopes to bounce back.