Snap Brass Spins Hard As User Decline Talk Gets Real On Earnings Call

By Dade Hayes, Dawn C. Chmielewski


Snap Inc. co-founder and CEO Evan Spiegel and CFO Tim Stone bobbed and weaved their way through the company’s third-quarter earnings call, offering few specifics about how they plan to reverse Snapchat’s sliding user numbers.

While revenue in the quarter set a record, and losses narrowed,¬†Wall Street analysts pounced on the decline in daily active users, or DAUs, of 2 million to 186 million. Asked repeatedly by analysts about how they planned to reverse the trend, they never seemed to break a sweat. They teased several changes coming in 2019, particularly an overhaul of the company’s Android app that has the internal codename “Mushroom.”

Ultimately, the executives did not provide a very detailed road map during the 20-minute Q&A period. Stone also wrapped up his prepared remarks preceding the Q&A with an ominous preview of fourth quarter earnings. “Similar to last quarter, we are not giving specific DAU guidance,” he said, “although our outlook assumes that Q4 DAUs will decline sequentially,” which would make three straight quarters of downward movement.

As investors took in the news and the spin, they sent shares tumbling 10% to $6.09 in after-hours trading, erasing 6% gains in today’s regular session. Snap, which went public in March 2017 at $24.48 a share, has seen its stock bottom out in recent weeks. Its value has dropped in half during 2018 amid lingering negative reaction from a major app redesign in 2017 and significant turnover in the C-suite.

Spiegel Mark Lennihan/AP Photo

Spiegel called the DAU dip primarily a “communications and marketing challenge.” He said the company would refocus on two primary objectives: attracting new users who are older than the traditional 13-to-34-year-old core; and targeting what Snap calls “rest of world” markets. In those global markets, as well as in North America, he said, the company is working to make Snapchat less taxing on mobile phones. “One of the things we hear from customers is that we use a huge amount of bandwidth,” Spiegel said.

He also preached a “back-to-basics” message, saying that the company intended to highlight the platform’s utility as a core means of communicating one to one. The company built programming and AI initiatives onto that primary function, Spiegel said. “The communication flow is what creates these other opportunities.”

In terms of interfacing with premium content creators, particularly via the Discover platform, Spiegel stayed upbeat. In particular, he said an unskippable 6-second ad unit rolled out on 12 new original shows is showing initial traction, he said.¬†“A variety of brands, such as Chick-Fil-A, Boost Mobile and major studios like Warner Bros, Fox and Universal have been using the format and we have been pleased with their initial results,” the CEO said in his prepared remarks.

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