Snapchat’s drastic app redesign is set to launch next month as it desperately tries to stay on top
Snapchat-owner Snap may be regretting its decision to rebrand as a camera company.
In its most recent earnings call, the company reported a net loss of $443.2 million, with $207.9 million in revenue, and nearly $40 million was lost on leftover Snap Spectacles. Or as the report explained, this money was “primarily related to excess inventory reserves and inventory purchase commitment cancellation charges.”
Before the call, analysts expected to see a loss of $393.8 million on revenue of $235.5 million. Adding further to its woes, these results sent shares tumbling more than 17% to $12.55 in after-hours trading on Tuesday.
This is despite Snap CEO Evan Spiegel recently boasting that the company had shifted more than 150,000 units of its smart sunglasses during a conversation at the Vanity Fair New Establishment Summit in October. That was more than the expectation of 100,000 units, Spiegel claimed at the time, before adding it’s more than the 143,000 net unit sales Apple managed with the iPad back in 2002.
The Spectacles come with an embedded camera in the rim, which records 10-second videos when pressed. The wide-angle, circular-format clips are uploaded to the wearer’s Snapchat account via a Bluetooth or WiFi connection. At the time of writing, they are still available from Amazon, as well as directly from Snap Inc.
To help sell its first foray into hardware, Snap had placed a number of vending machines in major European cities last month, including Paris, Berlin, Venice, Barcelona and London – the latter being situated beside the London Eye.
Spiegel’s misplaced optimism, and subsequent losses, come against a backdrop of slumping stock prices. The company’s IPO led to initial gains, but shares have fallen more than 34% over the past six months. The CEO has been criticised in the past for poor communication around the company’s aims, but Spiegel said at the Vanity Fair event that, since the company’s IPO, he has come to be aware of the importance of communication:
“One of the things I did underestimate was how much more important communication becomes,” Spiegel said. “When you go public […] you really need to explain to a huge new investor base […] you have to explain how your business works. And at the same time you need to do that, there are also all these new regulations about what you can and cannot say and how you can communicate.
“So I think one of the things we’ve been going through this year is how to communicate the Snap story.”
Spiegel also admitted that Snap is facing fear from investors: “I think investors are fearful, and fear is a powerful motivator […] they’re fearful we’ll never be profitable, or they’re fearful that competition will kill us or something like that. […] But I think those are kind of normal fears for any startup.”
In a bid to possibly appease those investors, Snap surprised many during the most recent call by announcing plans to completely redesign the Snapchat app. Spiegel also warned there’s a “strong likelihood” the design change will “be disruptive to Snap’s business in the short term” but didn’t say why or when the design changes would be seen by consumers.
“We don’t yet know how the behaviour 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.”