In an earnings release, Snap announced that it beat revenue expectations for last quarter, but lost users for the first time ever. The self-styled "camera company" reported revenue of $262 million, compared to a consensus estimate of $250.4 million, but said that its base of daily users shrank 2% to 188 million.
Those results, combined with news that Saudi Arabia's Prince Alwaleed Bin Talal bought 2.3% of the company for $250 million, sent the stock on a wild ride in after-hours trading: Shares initially spiked about 10% after hours before dropping back down to 13.25, roughly its closing price on Tuesday.
In prepared remarks on an investors' call, Spiegel blamed the loss in daily active users (DAUs) on a widely-panned redesign of Snapchat, its main app: "This was primarily driven by a slightly lower frequency of use among our user base due to the disruption caused by our redesign," he said. "It has been approximately six months since we broadly rolled out the redesign of our application, and we have been working hard to iterate and improve Snapchat based on the feedback from our community."
Snap had warned in its last earnings report that the February redesign, which merged a Stories feature with its Friends section, could drive away users. Snap has since reversed some of the changes, but Spiegel defended the redesign to some extent, characterizing it as a "tremendous opportunity... to show more of the right content to the right people."
A new metric made an appearance on Snap's call: Monthly active users (MAUs), which Snap has never before mentioned in an earnings release. MAUs "continued to grow" despite the drop in users visiting every day, Spiegel said.
Snap also shared earnings guidance for the first time, projecting revenue between $265 million and $290 million for Q3. They declined to give specific guidance on DAUs, but CFO Tim Stone said that "historically Q3 DAU growth rates have trended down both year-over-year and sequentially compared with Q2," suggesting that they could drop even further.
During a Q&A session with analysts, Spiegel didn't go into detail about much of anything and deflected most questions to Stone or Snap's head of strategy, Imran Khan.
Asked what Snap needs to do to reignite user growth, Spiegel responded by noting Snapchat's MAU count of over 100 million and said: "What we're seeing on the engagement side, over 30 minutes a day, is a significant opportunity for us." (Spiegel didn't spell out what that opportunity was.)
As for Snap's relationship with advertisers -- a subject of concern for investors, owing to reports that advertisers prefer Facebook's Instagram (FB - Get Report) -- Khan did most of the talking. Looking at the brighter side, Khan said that its most-engaged advertisers increased their spending on Snap's ad tools during the quarter.
"The advertisers who stayed with us have been very, very engaged and increased their budgets with us...I couldn't be more happy with it," Khan said.
The Snap executives also focused on an ongoing rebuild of the Android version of Snapchat, which they said would help them cast a wider net with new users worldwide. Spiegel said that Snap had been working for the past year on re-coding the Android app from scratch, but didn't say when they expected to be finished with the app. Asked when the new app would roll out, Spiegel said "we're testing it internally."