Snap Inc (NYSE:SNAP) had a quarter to forget according to its latest report, which revealed that earnings met expectations, but revenue fell below analysts' projections.
Snap's shares took a near 16 per cent dip in after hours trading when the messaging app revealed it had only seen a 15 per cent increase in users from a year ago despite a redesign overhaul.
Snapchat parent company Snap Inc.is looking for more ways to generate revenue, it has since made a decision to test a six-second ad aptly called "Commercials".
Daily active users were up 15% year-over-year, from 161 million to 191 million, but just 2% since last quarter, when that number was 187 million.
Analysts had been expecting Snap to post revenue of about $244 million, but it generated just $230.7 million for the quarter.
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Investors had a rosier outlook when Snap went public previous year.
Spiegel explained the company's reasoning for separating friends and creators in Snapchat's Discover platform was sound because it kept users from having their connection to their closest friends drowned out from pro creators who publish frequently.
The daily active users figure also came in below Wall Street's expectations of 194 million.
"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.
The redesign was meant to draw in a broader audience but sparked criticism from users including celebrities Kylie Jenner and Chrissy Teigen. "The confluence of the app redesign and backlash from core power users was a gut punch to Snap during the quarter, with signs more speed bumps could be on the horizon". A Change.org petition asking the company to remove the redesign now has more than 1.2 million signatures. "We are now focused on optimizing the redesign based on our ongoing experimentation and learning". She has since resumed using Snapchat.