Snap Inc. is dropping on Wall Street on Wednesday morning, one day after the Snapchat parent company reported users are dropping the popular app by the millions due to its much-maligned redesign.
Snap shares are down nearly 6 percent in early-morning trading, hitting $12.35 per share. The move follows Snap’s Q2 earnings report on Tuesday, which included both a better-than-expected loss and sales figures, but also that showed 3 million daily users ditched Snapchat since Q1. Snapchat now has 188 million users after posting negative user growth.
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CEO Evan Spiegel pointed to the app’s controversial redesign earlier this year — the one that received 1.2 million petition signatures for Snapchat to revert back to its classic look — as the main reason users are leaving. Snap announced, following anemic Q1 user growth, it would be redesigning its redesign.
“We feel that we have now addressed the biggest frustrations we’ve heard and are eager to make more progress on the tremendous opportunity we now have to show more of the right content to the right people,” said Spiegel on Tuesday.
Adding to Snap’s self-inflicted wounds is the rapid growth of Instagram, its chief rival on several fronts. The Facebook-owned photo-sharing app recently passed 1 billion users. It also boasts double the amount of daily Stories users, the 24-hour-only bulletin feature it lifted from Snapchat in 2016.
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Despite the downturn in users, there were some still positive signs for Snap shareholders. The company posted better sales and showed it was making more money off of the users it retained, with average revenue per user increasing 34 percent year-over-year to $1.40. That still pales in comparison to tech juggernauts like Facebook, which makes $25.91 off each user, but signals Snap has room to grow if it continues to build out its advertising business.