Snapchat maker Snap (SNAP -3.04%) has struggled with slowing sales growth and tough competition from Facebook's (META 0.27%) Instagram over the past year. Its stock recently slipped below $10 and now trades at a 40% discount to its IPO price of $17. Snap opened trading on March 2, 2017, at the even higher $24.

Snap has also been suffering an ongoing "brain drain" over the past two years, with the losses of CFO Drew Vollero, product chief Tom Conrad, Spectacles chief Mark Randall, sales chief Jeff Lucas, engineering chief Tim Sehn, and ad tech chief Sriram Krishnan.

A plastic brain melting on top of a smartphone.

Image source: Getty Images.

Snap recently announced that Chief Strategy Officer Imran Khan, who had held the position since 2014, will leave the company. He will stay on to assist in the transition of his duties. The loss of executives is troubling for Snap, which is struggling with apparrently peaking user growth, a scattershot product strategy with more misses than hits, and nonexistent profits.

What went wrong for Snap?

Snap's daily active users (DAUs) rose 8% annually to 188 million during the second quarter. However, that represented a 2% decline from the first quarter, marking Snap's first sequential decline in DAUs.

DAU Change

Q3 2017

Q4 2017

Q1 2018

Q2 2018











Data source: Snap.

Meanwhile, Facebook's Instagram -- which cloned Snap's ephemeral messages, filters, video stories, and more -- hit 500 million DAUs last September. In June, the company stated that Instagram Stories, which lets its users share disappearing photos, hit 400 million DAUs.

The general consensus is that Snapchat is simply outgunned by Instagram, which remains highly popular among teens. However, Snap also shot itself in the foot with a radical overhaul of its app which alienated many of its core users -- including celebrities like Kylie Jenner, who have a lot of sway with young social media users.

Snap also drew criticism for making light of domestic abuse by serving up an ad for a Would You Rather? game that  asked users if they'd rather slap Rihanna or punch Chris Brown. Snap apologized for the "disgusting" advertisement and promised to figure out how it got onto the site to make sure something similar did not happen. 

The incident didn't raise much confidence in Snap's transition toward programmatic ads, which generated 75% of its revenue last quarter -- compared to just 18% a year earlier.

None of Snap's newer projects have impressed investors. The introduction of Group Video Chat wasn't surprising, but the decision to bring back Spectacles (after the first version flopped) was baffling, and the addition of user-made lenses and developer tools didn't really address the core issue of slowing DAU growth. The stock is down about 40% over the past year.

A group of young women taking a selfie.

Image source: Getty Images.

The only interesting new feature was the addition of Snappable augmented reality games, but Facebook quickly cloned that feature with its own AR games for Messenger.

Why are Snap's executives leaving?

Most of Snap's departing executives left for other jobs. Sales chief Jeff Lucas joined Verizon's digital media unit, Oath, and Spectacles chief Mark Randall left to start his own company.

However, another possible reason for those departures is Snap's dependence on stock bonuses for compensation. Snap spent $156.4 million -- or 60% of its revenue -- on stock-based compensation expenses last quarter. Getting a big part of your paycheck in stock options is lovely when a stock is soaring, but it's demoralizing if it drops below its IPO price and seems destined to slip lower.

Snap's recent decisions, like relaunching Spectacles and redesigning its app, also indicate that management is struggling with conflicting visions for the company's future. CEO Evan Spiegel reportedly hates "growth hacking," but that's precisely what the company's recent scattershot efforts resemble. In Snap's first public conference call with analysts in May 2017, the company explained that "there is a lot of this thing in our industry called growth hacking, where you send a lot of push notifications to users or you try to get them to do things that might be unnatural or something like that."

Should Snap investors be worried?

Snap's loss of top executives is troubling, but plenty of other tech companies survived similar situations. Snap also replaced several of its departing executives with highly qualified successors.

Snap's current CFO, Tim Stone, was the VP of finance at Amazon. Its current engineering chief, Jerry Hunter, was previously an exec at Amazon Web Services (AWS), the biggest cloud platform in the world. Therefore, it might be easier for Snap to replace Khan than investors think -- or Spiegel might simply merge his role with the CEO position.

I personally think that an executive shakeup at Snap might be good for the company, since it could bring in fresh ideas for countering Facebook and Instagram. Of course, Snap needs to retain those employees for more than one or two years, which could be tough considering how bleak its future looks.