When questioned about the inability of new users to understand the Snapchat app just six months ago, Snap Inc. Chief Executive Evan Spiegel brought up his grandmother’s email habits to explain why he was not concerned about attracting non-millennials.
“We do tend to market our products directly to younger people, because frankly they’re more interested in learning how to use new technology products”, Spiegel said in his first earnings call after the company’s initial public offering. “And that sort of is partly inspired by trying to teach my grandma how to use e-mail and she really preferred to just talk on the phone.”
Apparently, Spiegel now believes grandparents are a more worthwhile target market. After reporting yet more substantial losses and lack of user growth Tuesday, Snap’s CEO said that the app would be redesigned in an effort to bring in new users.
“One thing that we have heard over the years is that Snapchat is difficult to understand or hard to use, and our team has been working on responding to this feedback”, Spiegel said in remarks prepared for a conference call. “As a result, we are currently redesigning our application to make it easier to use.”
Snap SNAP, +1.96% makes its money from advertising to users of the Snapchat app, so increasing the number of people using the app and being able to target different demographics could help solve some of Snap’s issues, including declining revenue growth. However, Spiegel admitted that the redesign brings risk, especially as hardcore users are introduced to the changes in the coming months.
“There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term, and we don’t yet know how the behavior of our community will change when they begin to use our updated application”, Spiegel said. “We’re willing to take that risk for what we believe are substantial long-term benefits to our business.”
In response to a question from an analyst on the conference call, Spiegel declined to say when the redesign would launch. He also said it would look to split the difference between the active content searching that Twitter Inc. TWTR, +1.39% employs and the friend-based focus of Facebook Inc. FB, +0.04%, though he declined to actually speak Facebook’s name.
“I think there’s an opportunity here for us to create a really great personalized content service that doesn’t at all diminish the great and, I think, very differentiated communications business that we’ve established”, Spiegel said.
The redesign will seek to put Snapchat content produced by media organizations in front of more users, as well as help users see more Stories produced by others that would otherwise not be discovered, the CEO said in his prepared remarks. He also said that Snap is looking to launch a new version of its app for Alphabet Inc.’s GOOGL, +0.93% GOOG, +0.72%
Android operating system built “from the ground up.”
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Spiegel said Snap has “been building a new world-class device lab for test automation and quality assurance” in its efforts to improve performance on Android, which is more popular globally than Apple Inc.’s AAPL, +0.32% iOS operating system. That could be where Snap’s research and development dollars have been heading, as the company deals with underperformance from its first major launch of a new product, Spectacles. Snap took a $40 million charge in Tuesday’s earnings report for an oversupply of the face cameras in its inventory channels after sales slowed down.
Snap shares dove 20% at times in after-hours trading following Tuesday’s earnings announcement, falling below $13. Snap went public earlier this year at $17 a share, and shares have sold for as much as $29.44 and as little as $11.28 in regular trading. The stock fell 34.8% in the past six months through Tuesday’s close, as the S&P 500 index SPX, -0.02% gained 8%.
