Snap Revenues Down Since Q4, Management Blames Seasonality, Redesign

Failing to capitalize on Facebook’s recent missteps, Snap’s first-quarter earnings and usership missed analyst expectations.

During the quarter, the “camera company” took in revenue of nearly $231 million, which represented an increase of about 54% year-over-year, while daily active users (DAUs) increased about 15% to 191 million.

Since the fourth quarter of 2017, however, revenue was actually down 19%, while DAUs increased by only 2%.

Snap CEO Evan Spiegel attributed the less-than-stellar numbers to seasonality and Snapchat’s recent redesign, which separated content from a user’s friends and professional publishers.

“As we have mentioned on our past two earnings calls, a change this big to existing behavior comes with some disruption,” Spiegel told investors on Tuesday.

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Striking a tone of cautious optimism, Spiegel said: “We are already starting to see early signs of stabilization among our iOS users as people get used to the changes. But we still have a lot of work to do to optimize the new design, especially for our Android users.”

Time spent on Snapchat remained more than 30 minutes per day on average following the redesign, while Spiegel insists the company has begun to realize some of the positive benefits of the change, including increased new user retention among older users.

Looking ahead, Spiegel said Snap is focused on optimizing the redesign, based on his team’s ongoing experimentation and learnings.

“For example, when we separated friends’ Stories from creator Stories, we also moved them to the left side of the camera and merged them into the Chat feed,” he noted. “We learned that combining watching Stories and communicating with friends into the same place made it harder to optimize for both competing behaviors.”

Despite slower-than-expected growth, Snap remains a competitive consumer-facing tech company, according to eMarketer analyst Debra Aho Williamson.

“The company is also getting more serious about direct-response advertising, which is a huge revenue driver for Snapchat’s competitor Facebook,” Williamson said in a recent note. “Overall, we see Snapchat gaining in both total revenue and share of the digital ad market.”

This year, eMarketer expects Snap to generate $1.36 billion in net worldwide ad revenue -- up more than 92%, year-over-year.

Along with its redesign, Snap just recently debuted a new version of its video-capturing Spectacles. The new design is slimmer than the first version and water resistant. It also hopes to boast better audio and the ability to take a photograph with the tap of a button.

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