Snap Inc. (NYSE: SNAP), the parent company of Snapchat announced a drastic decline in the user growth on Tuesday at 2018 Q2 earnings call. With 188 million Daily Active Users (DAUs) by the end of June 30, 2018, Snapchat user growth decreased by 2 percent against 191 million in 2018 Q1. Though, 2018 Q2 DAUs figures are much higher than 173 million users recorded in the second quarter of last year.
This is the first time the image sharing app has accounted a negative net addition to its user count, since its inception in 2011.
The current picture of Snapchat looks more horrific compared to its user growth rate two years back when it added 21 million daily users in the second quarter of 2016.
On the positive note, the company’s revenue grew 44 percent to $262 million in the three months ended on June 30, from $182 million revenue earned a year ago. Correspondingly, the net loss also dipped 20 percent to minus $353 million in the past quarter against a net loss of minus $443 million posted in Q2 2017.
“We are excited by the progress we have been making and are optimistic about the opportunities ahead as we continue to invest in innovation,” said Snap Co-founder and CEO Evan Spiegel during the earnings call.
Post 2018 Q2 earnings call, Snapchat stock mounted 11 percent to $14.60 during after-hours trading, only to fall sharply to $12.58 per share after the company failed to answer few imperative questions about the further roadmap, reported TechCrunch. By the end of the day, the company stock was floating at the closing price of $13.20 per share.
Spiegel blamed the rocky redesign of Snapchat interface for the drop in the user growth in 2018 Q2. The new design was meant to attract new users and differentiate between personal and branded/celebrity content. The action did not go well with the Snapchat fans.
“We feel that we have now addressed the biggest frustrations we’ve heard and are eager to make more progress on the tremendous opportunity we now have to show more of the right content to the right people,” Spiegel added in his remarks.
He simultaneously credited the re-design as generating an 8 percent increase in retention rate among users older than 35 years of age, reflecting the app’s new design is clearer and well structured.
Instagram increased its followers by copying Snapchat’s popular feature, Story, in which the users’ images or videos disappear after 24 hours.
Facebook-owned image sharing now holds 400 million daily active users using its Stories feature, surpassing 188 million DAUs of Snapchat, analyzed Recode. On the other hand, Facebook itself laid down an extensive plan to run advertisements in Stories segment.
Meanwhile, Saudi Arabia Prince Alwaleed Bin Talal has acquired 2.3 percent stake worth $250 million in Snap. The investment has come exactly at the moment of need for the company to sustain.
The Saudi Prince invested in the social media company with an adjusted valuation of $10.8 billion instead of accounting its actual market capitalization worth $16.82 billion.
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