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Is Snapchat’s redesign working?

Plus, other questions we have ahead of Snap earnings on Tuesday.

Snapchat CEO Evan Spiegel
Snapchat CEO Evan Spiegel
Michael Kovac/Getty Images for Vanity Fair

When Snapchat rolled out a highly anticipated redesign back in January, users freaked out.

Celebrities complained that they couldn’t reach their fans. Fans complained that they weren’t hearing enough from celebrities. Publishers were confused — some pleasantly surprised, but confused nonetheless.

More than 1.2 million people even signed a petition asking the company to revert back to its original design. It was bad enough that Snap actually responded.

All of that made it very interesting this week when Recode reported that Snapchat is testing a redesign to its redesign, putting some user-generated content back alongside the professional stuff from brands and celebrities. That runs counter to the company’s original thinking, which was to separate those two groups entirely, and it’s still not clear why Snapchat is testing another new look.

Are people posting less content inside the app? Are they ignoring the professional content now that it’s in a section of the app without the personal friend posts to lure users in?

Is the redesign working?

That will be an important question when Snap reports Q1 earnings after the markets close on Tuesday. It has been more than a year since Snap went public, and it delivered its first (and only) solid quarter this year when it reported better-than-expected Q4 revenue and user growth. Here’s what to look for this time around.

Has Snapchat’s user growth returned?

When Snap filed to go public in early 2017, one of the most concerning data points was Snapchat’s user growth: The app’s growth, which had been improving steadily, suddenly took a turn around the same time that Instagram started copying some of Snapchat’s best features. The app’s growth never really rebounded during its first year as a public company. Snapchat had its best user growth quarter in Q4, though, and a second straight solid growth quarter could put memories of that Instagram dip to bed — at least for a while.

What should we make of Snap’s hardware efforts?

Last week, Snap unveiled a new pair of Spectacles, the company’s video recording sunglasses. They’re fun, and look like a nice technical improvement over the original version. But Snap doesn’t make much money from Spectacles, and had a few blunders with its first version of the product, namely that it resulted in a one-time $40 million loss thanks to excess inventory. Snap appears to be playing the long game with Spectacles, but company executives haven’t been very public about why they’re bothering to pursue hardware. Given the cost and resources dedicated to the glasses, Tuesday could offer CEO Evan Spiegel a chance to lay out his vision for hardware development.

Photo of Snapchat’s new Spectacles sunglasses that allows you to take video or take photos while you wear them
Snap’s new version of Spectacles
Cynthia Gil for Recode

How will GDPR impact Snap’s business?

New privacy regulations in Europe, known as GDPR, were a major point of concern for Facebook investors last week. Given that Snap, like Facebook, makes almost all of its revenue from targeted advertising, it’s fair to wonder how these new rules could impact the business. Snap hasn’t talked much publicly about GDPR in the way Facebook has, but it has some information up on the company’s website. “Our data privacy practices have been aligned with the principles underpinning the GDPR for a long time,” Snap claims.

How long can Snap lose money?

Snap isn’t close to profitable, but Spiegel is interested in getting there. He told employees earlier this year that getting to profitability in 2018 was a goal. It’s not exactly necessary, though, so long as Snapchat keeps growing its user base. Twitter, for example, wasn’t profitable until four years after its IPO, an issue that really only became an issue because that user growth pretty much stopped. Snap lost $3.4 billion in 2017, though a lot of that loss was attributed to payouts to Snap executives, primarily Spiegel, because of the company’s IPO.

Snap’s timing is ... interesting

Snap will report earnings Tuesday afternoon after markets close. That’s the same day as Facebook’s annual developer conference, F8, which will be a big deal this year given all of the company’s recent developer changes post-Cambridge Analytica. Will Snap’s earnings get buried in all the Facebook news? Or will Snap steal the show from Facebook with better-than-expected results?

Analysts expect Snap to report a loss of 17 cents per share on revenue of $243.5 million, according to Yahoo Finance. That would represent almost 63 percent year-over-year revenue growth. RBC Capital’s Mark Mahaney projects the company added seven million more daily active users in the quarter; it had 187 million daily users as of Q4.

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