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Remember when Snapchat was the hottest new social media darling? That now seems like a very long time ago. The company might have gone public in a splashy IPO in March 2017, but it’s been all downhill since then. The latest sign that Snapchat could be in trouble is a bold new plan to redesign the app.
Snapchat’s disappointing financial results
According to Snap CEO Evan Spiegel, the upcoming Snapchat app redesign is at least a tacit admission that financial results have been less than stellar over the past three quarters. Ad revenue is down 60 percent on a year-over-year basis. The company had to absorb a $40 million charge-off for unsold augmented reality Spectacles. And most distressingly, the number of daily average users of Snapchat is on the downswing.
Snap, as might be expected, is trying to put a brave new face on things, saying that daily average users are down due to seasonality. (On Wall Street, that’s the same as a failing fashion retailer blaming a huge plunge in holiday sales on “unseasonably warm weather”.) Moreover, Snap points out that 70 percent of social media users between the age of 13 and 34 use Snapchat regularly, suggesting that it’s still the social media platform of choice for millennials.
How will Snapchat really change?
Ok, but why the redesign, then? The core problem seems to be that many people over the age of 34 have never quite figured out why they should be using it – especially when Facebook and Instagram have now added many of the same features (such as Stories) that once made Snapchat unique among all social media platforms.
Snapchat has declined to say how its app would actually change, only to comment that it will become “easier to use” and more relevant for “those older than 34.” Oh, and it will be easier to use for “people outside the U.S. and Western Europe.”
The pros and cons of a Snapchat app redesign
You can view this in one of two ways. If you’re a positive-thinking guy or gal, you’ll probably spin this as Snapchat getting access to a whole new audience of users. That’s good for the daily average user count, and it’s also good for advertising revenue.
However, if you’re a skeptic, the only possible way to interpret this piece of news is that Snapchat is trying to become more like Facebook, and not the other way around. In short, Snapchat has realized that it is going to have to look and act a lot more like Facebook if it is going to thrive and prosper. Which means, of course, that part of what made Snapchat so unique and innovative in the first place may be going by the wayside. We all know how that story ends.
That’s not to say that the price of Snapchat stock is headed to zero any time soon. But it is worrisome that the price of Snap has now dropped below the IPO offering price of $17, and shows no signs of stopping its freefall anytime soon. So this new app redesign is really an effort to put a floor under Snap’s current stock price. That might just buy Snapchat the time it needs to figure out how it’s going to keep up with Facebook in 2018.