Snap’s stock price plummeted during after hours trading today following its first quarter earnings report. The stock dropped by more than 15 percent, or roughly a sixth of its worth. Although the app grew its global users by four million or so since the last quarter, it made less money per user.
During the prior quarter, the company made $1.53 per user globally, or $286 million in total revenue. This quarter, that dropped to $1.21 per user and $231 million in revenue. Still, that’s a major growth from just over a year ago when its quarterly revenue was $150 million. The company’s CFO, Drew Vollero, says to expect an even further drop in the second quarter of this year.
He said: “As we think about our year-over-year revenue growth rates, we are planning for our Q2 growth rate to decelerate substantially from Q1 levels, with growth in auction impressions, partially offset by pricing for both Snap Ads and Creative Tools.”
The bad news comes after a surprisingly good performance from Snap last year in which it grew its users and revenue significantly. The stock grew by 25 percent as a result. The lack of revenue growth follows Snap’s implementation of its app redesign, which it said would help users separate their personal lives and branded content. Those users revolted once the redesign finally went live and filed a petition in an effort to get the company to revert back to its old UI.
CEO Evan Spiegel acknowledged users’ unhappiness today and said, “a change this big to existing behavior comes with some disruption, especially given the high frequency of daily engagement of our community.” He says the team is now focusing on optimizing the design, like putting creators’ Stories and friends’ Stories to the right of the camera. (Snap moved friends’ Stories to the left of the camera to combine it with friend chats.) Spiegel also says the team is working on its Android app, which is “still a weakness.”
Strangely, no one mentioned Spectacles in their prepared remarks, even though the company just announced version two this past week. Reminder: the company lost nearly $40 million on unsold pairs of its first version.