Snap Earnings Preview: Can ‘Clueless’ Snapchat Pull Off a Win?

All eyes will be on Snap’s user and revenue growth following its controversial redesign

Last Updated: May 1, 2018 @ 10:31 AM

We’re about to see if Snap’s gamble paid off.

Snapchat’s parent company is reporting earnings on Tuesday for the first time since rolling out its much maligned app redesign earlier this year. The redesign aimed to make the popular app “easier to use,” as CEO Evan Spiegel put it, by creating a starker separation between content from friends and publishers in its Discover tab. The change was met with staunch resistance, as 1.2 million users signed a petition for the app to revert back to its classic look. Snap said “we hear you“… and then kept it as is. Even Kylie Jenner tweeted her displeasure, saying the redesign was “so sad.”

Compounding the high risk, high reward nature of the move was the fact Snap was coming off its best quarter, by far, as a public company, adding 9 million users during the fourth quarter of 2017.

But other major social media companies have made unpopular changes and still went on to thrive. Instagram tweaked it’s algorithm, stopped showing pictures in a chronological order, and has added hundreds of millions of users in the meantime. Twitter was clowned for doubling to a 280 character limit last fall, and has since reported its first two profitable quarters.

In other words, an unsettling redesign doesn’t have to be a death sentence for Snap. But Wall Street will have its eyes focused on user growth and ad revenue on Tuesday. The company is expected to add about 7 million users, based on analyst estimates, and report a loss of 17 cents a share on $243.5 million in revenue.

One way Snap hopes to boost revenue is by “embracing the creator community,” Snap VP of Content Bobby Murphy said earlier this year. By promoting and making popular Snapchatters easier to discover — something its rival, Instagram, has mastered — Snap gives users a reason to stay on the app longer. The longer users are on the app, the more ads they’ll see.

Cyrene Quiamco, an interactive artist on Snapchat, told TheWrap the redesign has increased views 50 percent for her, with many of her snaps receiving more 100,000 views. “I think that has a lot to do with the redesign, because I’m a verified user and boosted a lot,” Quiamco told TheWrap. “Before the redesign, numbers had been declining a little bit.”

Ross Gerber, president and CEO of Gerber Kawasaki Wealth and Investment Management, told TheWrap Snap’s “management is clueless” — pointing to moves like its continued pursuit of Spectacles, its picture-taking sunglasses — but the company is nevertheless “taking steps in the right direction.”

From a business standpoint, Gerber pointed to Snap’s custom filters for advertisers as something that could entice more marketers while Facebook dusts itself off from its massive data leak. He also applauded Snap for “consolidating staff in one location” in Santa Monica as a sign of a maturing company.

Still, how the changes impact its user base will be key. After reports Snap was already exploring a redesign of its redesign last week, the company’s stock dropped 7 percent. Snap told TheWrap it was beta testing some alterations, but insisted the spirit of the redesign, with friends on the left and publisher content on the right, would remain untouched.

Some could interpret this as a sign its first redesign hasn’t been met with open arms, that Snap is looking to win back users who have jumped ship. But Gerber told TheWrap it actually shows the company is now willing to listen to its users — and could help it continue to grow. We’ll find out on Tuesday afternoon whether Snap’s first crack at a redesign actually paid off.