Snap halts user exodus; shares soar on financial results

SAN FRANCISCO • Snap lost millions of users last year after an unpopular redesign of Snapchat, its "ephemeral" messaging app. Now, that exodus appears to be slowing.

The company said on Tuesday it had stanched the flow of people leaving its platform. Snap's daily active users totalled 186 million in the fourth quarter, the same as in the previous quarter and down just one million from a year earlier, after two consecutive quarters of falling user numbers.

In addition, Snap's revenue rose 36 per cent to US$390 million (S$528 million), while its net loss fell to US$192 million.

"Change is always difficult, and this past year was no exception," Snap chief executive Evan Spiegel said in prepared remarks about the company's earnings.

Wall Street analysts said they were relieved at Snap's financial results, which sent its shares soaring more than 20 per cent in after-hours trading, following months of turbulence for the company.

Since going public in 2017, Snap has been dealing with increasing competition from Facebook, including its core social network and its other apps, such as Instagram and WhatsApp.

Last year, Snap redesigned its app, effectively separating social and media into two sections. Its users soon revolted, with celebrities like Kylie Jenner criticising the change.

More recently, Snap endured a wave of executive departures. The company said last month that its chief financial officer, Mr Tim Stone, would leave, less than a year after he was hired last May.

Mr Imran Khan, Snap's chief strategy officer, stepped down last September. That same month, the company lost Mr Nick Bell, its vice-president for content.

Its head of hardware, Mr Sahil Sharma, exited in December.

On top of this, Snap is under scrutiny from the Securities and Exchange Commission and Justice Department in the United States.

The company said late last year it had responded to subpoenas from those agencies regarding disclosures it made before its initial public offering.

In an earnings call on Tuesday, Mr Spiegel said he planned to take time with the search for a new chief financial officer "and really get it right".

Snapchat users on Apple devices are starting to return to the platform and daily active use has increased among those people.

Snapchat's Android app update is also gradually being introduced to a small set of users, allowing them to open the app 20 per cent faster, Mr Spiegel said.

He estimated that there are two billion Android users who do not use Snapchat - and that luring even a small percentage of them to the app would "make a real difference".

Ms Lara Sweet, Snap's interim chief financial officer, said the company was "cautiously optimistic" that user numbers would not decline in the current quarter.

In total, Snap said it anticipated revenue of US$285 million to US$310 million during the current quarter.

Still, Snap remains small compared with Facebook's photo-sharing app Instagram, which has been rapidly gaining new users.

Facebook announced during its earnings call last week that Instagram had 500 million daily active users of Stories, a feature that lets people share photos and videos that have a lifespan of 24 hours.

Snapchat had pioneered the Stories feature.

"This was by far the most hated stock of all of the Internet, by 10 miles," Mr Brent Thill, a managing director at Jefferies who follows tech companies, said of Snap. "What they did was a step in the right direction. They are not out of this yet, but this is step one."


A version of this article appeared in the print edition of The Straits Times on February 07, 2019, with the headline 'Snap halts user exodus; shares soar on financial results'. Subscribe