Snap Stock Drops 16% on Redesign Worries

On Tuesday, Snap Inc. came up short of forecasts on Wall Street for revenue as well as regular users after its redesign of the messaging app Snapchat upset some users and advertisers, helping send shares plunging by 16%.

Revenue growth likely will slow significantly during the second quarter said the company showing that it is still facing an uphill climb after an overhaul of the app meant to fend off Facebook its biggest rival adds features that are similar to Snapchat.

The amount of daily active users on the app, which for Snapchat is crucial when it comes to generating revenue from advertising, increased to over 191 million during the quarter that ended on March 31. That however was short of Wall Street expectations of 194.15 million.

The figure for users was approximately 15% higher than that of one year ago compared to growth during the previous quarter of 18%.

Upon the news, shares of Snap plunged by over 16.5% in trading after hours, extending a drop in share price since February. Shares had soared on February 7 by 48% topping the IPO price for Snap of $17, on hopes its redesign would turn things around. The share price has fallen for the most part since then.

One Wall Street analyst said that the Snapchat redesign did not make just its users unhappy, it made its advertisers even more concerned and that is not a place a company wants to be.

However, Snapchat loyalists remained highly engaged as they use the app several times each day and ad formats on Snapchat remain amongst the most creative.

For its quarter that ended during March, Snap’s total revenue increased 54% from the same period one year earlier ending at $230.7 million, while analysts were expecting $244.5 million in revenue.

Executives at the company acknowledged the new design has hurt its results but did say they would remain with their plan of keeping content from friends apart from other publishers. This type of approach will help to propel growth during the long run, the company said.

CEO Evan Spiegel said that redesign of the app lays a foundation for the future of Snap’s communications projects and media platform, and the company is looking forward to doubling done on each.

The redesign has been setup to draw in broader audiences, but raised criticism from its users including Hollywood celebrities Chrissy Teigen and Kylie Jenner.