Snap to Redesign Snapchat App, Tencent Buys Big Stake
Snap’s stock has dropped 17 per cent since the company reported a net loss of $443 million in its third quarter—more than triple its loss from a year earlier.
Since Snap’s Q3 earnings report was released on Tuesday, share price has floated around $12.40. The company has not traded above its IPO of $17 since early July, and fell to an all-time low in August.
Snap announced it had generated $208 million in revenue during the third quarter, up 62 per cent from the same time last year. But that number didn’t match analyst expectations that pegged revenue at $235 million. Daily active users increased 4.5 million quarter-over-quarter, a bump of 3 per cent.
On the heels of the disappointing results, long-term shareholder Tencent scooped up 12 per cent of Snap, a $2 billion investment. The Chinese company owns WeChat and microblogging platform Weibo.
Snap CEO Evan Spiegel hopes a Snapchat redesign will make the photo and video sharing app easier to use, and ultimately help the struggling company attract new users. Growing its users is one of the company’s three priorities for 2018 in addition to augmented reality and content.
“There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term, and we don’t yet know how the behavior of our community will change when they begin to use our updated application,” said Spiegel in prepared remarks. “We’re willing to take that risk for what we believe are substantial longterm benefits to our business.”
Spiegel admitted the company has neglected Android users and will be building a new version of Snapchat’s Android application “from the ground up,” hoping to accelerate adoption.
The CEO said the company also needs to attract users above the age of 34 and users outside Western countries—two untapped groups. In the last quarter about 80 per cent of Snap’s revenue came from the United States alone.
To grow revenue, Snap is going to build more distribution and monetization opportunities for content creators, reaching larger audiences and growing their business through Snapchat.
