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Why Snap Shares Got Clobbered Today

By Evan Niu, CFA - Feb 22, 2018 at 2:22PM

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One of Snapchat's most prominent celebrities has seemingly quit the service.

What happened

Shares of Snapchat parent Snap (SNAP 0.30%) got clobbered today, down by 7% as of 2:45 p.m. EST, after celebrity Kylie Jenner tweeted that she doesn't really use the service much anymore. Jenner is one of the most prominent celebrities on Snapchat.

So what

The criticism is just the latest regarding Snapchat's redesigned interface, which has attracted considerable backlash among Snap's user base. The company had 187 million daily active users (DAUs) at the end of the fourth quarter. Early user reviews were overwhelmingly negative, a social media hoax promising to go back to the old interface went viral this month, and a change.org petition asking Snap to roll back the update has garnered over 1.2 million signatures.

Snapchat logo

Image source: Snapchat.

CEO Evan Spiegel believes that the criticisms only validate the changes.

Now what

Incidentally, Spiegel made those comments at an investing conference, and the exchange included a reference to Kim Kardashian, Jenner's sister. Users previously felt more of a connection to the celebrities that they follow on Snapchat, such as Kardashian, and Spiegel's implication was that Snap doesn't want users to feel like they are personal friends with celebrities. Still, that doesn't change how instrumental celebrities are in driving engagement on Snapchat.

The broader risk is that the user backlash translates into users defecting to rival platforms, most notably Facebook's Instagram. That photo/video sharing service has replicated many of Snapchat's core features and has a more intuitive interface. Instagram Stories has more DAUs than all of Snapchat.

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