Programmatic Lunch

Snapchat is getting a major redesign following $443m losses this quarter

Alex Spencer

Snapchat parent company Snap has reported losses of $443.2m (£337.4m) in its financial results for Q3 2017 (the period ended 30 September).

It’s almost exactly the same figure that the company reported last quarter – $443.1m – but the announcement caused Snap’s stock prices to tumble by 21 per cent in after-hours trading, dropping from $15.40 to $12.10 in the space of 10 minutes.

The company reported revenues of $181.7m for the quarter, up 153 per cent year-on-year – though notably, at $115.9m, the company’s losses were much smaller in the year-ago quarter.

On the earnings call that followed the announcement, Snap CFO Drew Vollero pointed to Spectacles, the company’s wearables product and first foray outside of the app world, as a major contributor to the losses.

“Unfortunately, we misjudged strong early demand for Spectacles and purchased more inventory than we now anticipate being able to sell,” Vollero said. “As a result, we recorded a $39.9m non-recurring expense primarily related to excess inventory and purchase commitment cancellations. Moving forward, we will continue to be in the marketplace with Spectacles and expect modest revenue from the product line.”

It’s worth noting, though, that this accounts for less than 10 per cent of the company’s total losses.

Even as Snapchat’s user numbers soar – DAUs hit 173m in the quarter, up 21 year-on-year and four per cent quarter-on-quarter – it seems to be incapable of making enough revenue from them. The company’s solution to this problem, for now, appears to be trying to attract yet more users.

“We are currently redesigning our application to make it easier to use,” said CEO Evan Spiegel on the earnings call. “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 behaviour of our community will change when they begin to use our updated application. We're willing to take that risk for what we believe are substantial long-term benefits to our business.”