Snap shares clobbered by a tweet
Kylie Jenner calls attention to app’s controversial redesign, pushing shares down 6%.
Reality television star Kylie Jenner is one of social media’s most prominent influencers. When she tweets about a product, brands expect her 24.5 million followers will listen.
After what happened Thursday, it appears investors are listening as well.
Jenner helped send shares of Snap Inc. down more than 6% after she tweeted disapproval of the redesign of the company’s video messaging app Snapchat, calling it “so sad.”
The redesign was supposed to make Snapchat more approachable to new users, but it’s been the subject of a backlash from its existing audience, highlighted by a change.org petition with more than 1.2 million signatories.
“With the release of the new Snapchat update, many users have found that it has not made the app easier to use, but has in fact made many features more difficult,” read the petition, which was started by a user named Nic Rumsey.
Jenner perhaps feels the same way (representatives for the star did not respond to a request for comment).
The celebrity, made famous from her family’s reality show, “Keeping Up With the Kardashians,” tweeted Wednesday: “sooo does anyone else not open Snapchat anymore? Or is it just me… ugh this is so sad.”
Minutes later, she tweeted: “still love you tho snap … my first love.”
But the damage had already been done, as the tweet sparked a sell-off that saw Snap shares shed weeks of gains to close at $17.51.
The redesign separates Snapchat into three parts: friends, the camera and photo-related features, and the
Discover tab, which consists of curated and sponsored content, publishers and influencers.
One of the chief complaints about the new design was that celebrities were removed from the tab where friends are found and placed instead in the Discover tab.
Snap explained the move as a bid to separate the social from the media when it first announced the rollout of the redesign in November.
Analysts and industry experts have long argued that Snapchat needed a makeover to make it more accessible to an older, wider audience. The company has been struggling to grow its user base and the app has been criticized for being too complicated to master.
Venice-based Snap has defended the move, saying users will get used to the changes in time.
“By putting everything from your friends in one place, our goal was to make it easier to connect with the people you care about most,” the company said in a response posted on the change.org petition page. “The new Friends page will adapt to you and get smarter over time, reflecting who you’re most likely to be Snapping with at that moment. This same personalization is also true of the new Discover, which will adapt to you the more that you use it.”
Snap co-founder and Chief Executive Evan Spiegel has also personally brushed off the criticism about his app’s new look.
“One of the complaints we got was, ‘Wow, I used to feel like this celebrity was my friend, and now they don’t feel like my friend anymore.’ And we’re like: ‘Exactly. They’re not your friend.’ So for us, even some of the frustrations we’re seeing really validate those changes. And it’ll take time for people to adjust,” Spiegel said at a Goldman Sachs technology conference in San Francisco last week, the Guardian reported.
Facebook, Instagram and Twitter faced early criticism from users when they redesigned aspects of their apps. It remains to be seen whether the backlash will dissipate for Snapchat the way it did for the other social media companies.
Until then, analysts say the redesign is a risk to the company’s financial performance in the near term. Citibank analysts Mark May and Hao Yan downgraded their rating for Snap shares to “sell” from “neutral.”
“While the recent redesign of its flagship app could produce positive longterm benefits, the significant jump in negative app reviews since the redesign was pushed out a few weeks [ago] could result in a decline in users and user engagement, which could negatively impact financial results,” the analysts wrote in a research note Tuesday.
Analysts will be paying attention to whether advertisers or publishers are uneasy about the backlash. Cosmetics brand Maybelline posted a poll on Twitter on Thursday asking if it should remain on Snapchat.
The controversy comes weeks after Snap posted a strong fourth-quarter earnings report that beat Wall Street’s expectations. Those results were fueled by robust user growth and the introduction of automated advertising sales.
Daniel Ives, an analyst for GBH Insights, said investors were overreacting to the backlash over the redesign. “The Street is hyper sensitive to the app redesign with the petition issues swirling around,” said Ives, who maintains a buy rating for Snap.
Still, Ives said it was paramount that Snap win back high-profile users such as Jenner to stem the negative reaction to the changes.
“Snap is doing the right strategic moves but needs to manage this process well as celebrity influencers like Kylie Jenner are a key ingredient in the company’s recipe for success,” he said. “The app redesign was a necessary step for Spiegel and team to expand the demographics and monetization footprint of the platform, but the core user base must be managed through this transition, and Kylie Jenner is not helping things.”