Snapchat scrambles after redesign gamble

Sales, user growth slow after risky changes to app that led to public revolt

SAN FRANCISCO— Snapchat’s redesign isn’t working.

In November, parent company Snap Inc. embarked on a dramatic reorganization of its mobile photo-sharing app to combat sluggish growth. But once the update reached all of Snapchat’s users in the first quarter, user additions and sales slowed even further amid a public revolt over the design.

Revenue gains in the current quarter will be even smaller, the company said this week, sending shares plunging as much as 19 per cent in extended trading. Chief executive officer Evan Spiegel made the case that while the change is disruptive in the short-term, it’s necessary to fuel Snap’s business into the future. But two quarters in, he’s having a hard time making that argument work.

Spiegel’s pitch for the new way of using Snapchat was rooted in his strong belief that messages and posts from friends should be separate from content from strangers and companies.

While he admitted that the new design “created some headwinds in our revenue this quarter by disrupting user behaviour and creating some apprehension among our advertising partners,” Spiegel told investors on a call that the redesign “brings us closer to accomplishing our mission.”

In one concession to the app’s critics, Snap is making a further tweak to Snapchat’s design to put some updates from friends back into the part of the application with news and celebrities, Spiegel said. The decision could provide some relief to users — or it could further confuse the public.

In its earnings report, the company said daily active users on Snapchat reached 191 million in the first quarter — missing the 194.3-million average analyst estimate, according to data compiled by Bloomberg. Revenue was $230.7 million (U.S.), well below predictions for $244.9 million.