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May 2, 2018

“Challenging” Conversations with Advertisers and a “Legacy Codebase Issues” – Snap Shares Tumble on Mixed Results

Snap shares tumble, can the social media app turn its luck around?

By April Slattery

Snapchat’s parent company Snap admitted it has had “challenging conversations” with advertisers following a redesign, that stopped most recent stories showing up on top for users – a system that had meant professional content creators were beginning to dominate the social media platform.

Chief Strategy Officer Imran Khan said in remarks prepared for an earnings call: “We made the proactive and deliberate decision to prioritize our long-term consumer product goals over our short-term monetization goals… Our redesign created some headwinds in our revenue this quarter by disrupting user behavior and creating some apprehension among our advertising partners.”

Despite this, total advertising revenue for the quarter was up 62 percent year-on-year at $229 million. The company’s shares fell by 16.5 percent to $11.77 in after-hours training however; slipping from $20.75 in February, recording a net loss of $2 billion of stock-based expense.

CEO Evan Spiegel said: “While our decision to migrate our Snap Ads business to our programmatic auction led to a short-term slowdown in our revenue growth last year, we made the transition quickly and the company is far better for it.”

He added: “We are now better able to manage and optimize our overall advertising business and auction dynamics, which has accelerated the pace with which we can improve ROI for our advertisers. In Q1, both the average cost per app install and the average cost per swipe in the United States were well under half of what they were the year before, and we are continuing to make improvements”.

Legacy Codebase Issues

CEO Evan Spiegel highlighted that Android performance is still an ongoing weakness for the company as well, blaming legacy codebase issues.

He said: “While the investments we made in our performance automation systems have significantly improved the speed and scale at which we are able to identify and fix these kinds of issues, our legacy codebase remains a problem”.

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In other news for the company, he highlighted its expanded augmented reality (AR) platform and offerings in Q1, saying its “Lens Studio” has seen incredible adoption.

“Over 200 of the Lenses created by our community were viewed over a million times in the few months since launch. Our community has used these tools in ways we would have never imagined, and they have inspired us to invest more in empowering their creativity.”

“The redesign didn’t just make users unhappy, it also made advertisers more concerned,” said Debra Aho Williamson, eMarketer analyst, said. “That’s not a good position to be in.”

Disaster Design

The design caused a huge backlash for the company; seeing over one million people sign a petition to revert back to the original design. Amongst those against the changes is celebrity Kylie Jenner, who expressed her dislike to the application via her Twitter account reading “Does anyone else not open Snapchat anymore? Or is it just me?”

The tweet to her 25.4 million followers caused an immediate impact in Snap’s shareprice.

Revenue gains in the current period will “decelerate substantially” from the first quarter, Snap warned.

“Snap is going through a painful maturation phase,” Daniel Ives, an analyst at GBH Insights told Bloomberg. Wall Street was looking for “further red flags around the company’s much-discussed app redesign,” he added.

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