Snap Unveils App Redesign, Takes Shots at Facebook

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When Snap (NYSE: SNAP) reported dismal third-quarter earnings earlier this month, it confirmed that it was in the process of overhauling its core Snapchat app. By redesigning the app's interface, Snap was acknowledging that Snapchat is hard to use and that many users were put off by the unintuitive interface. But Snap wasn't quite ready to provide any real details surrounding the redesign.

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Until now.

"The new Snapchat separates the social from the media."

Snap has announced the new version of Snapchat in an official blog post, including the short video above of CEO Evan Spiegel explaining how the new app works. The app will still open directly to the camera as before, but the biggest change is that Snapchat says the new app "separates the social from the media." In other words, Snaps and Stories made by friends and family will be located in a new "dynamic Friends" page (to the left), while content created by publishers will be in a new Discover section (to the right).

The new Discover section will now include algorithmic curation as promised, acknowledging that algorithms can indeed improve relevance. Facebook (NASDAQ: FB) was the first to implement algorithmic curation, and social media peers are now starting to see the light. Snap will still utilize human curators that review and approve all content, but the algorithms will make Discover personalized to the user.

Snapchat's redesign starts rolling out on Friday.

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The "Netflix of social media"...?

In an op-ed in Axios, Spiegel also offered more detail into Snap's strategy. Without naming Snap's larger rival specifically, Spiegel takes some clear shots at Facebook's role in the rise of fake news, arguing that mixing social and media has contributed to the problem. Snap's algorithms will focus on the user's interests, not the user's friends' interests, according to Spiegel. The CEO argues that this approach "helps guard against fake news and mindless scrambles for friends and unworthy distractions."

Spiegel then compares the model to Netflix, which uses machine-learning algorithms to recommend content based on viewing history.

It's Snap's turn to copy Facebook

Facebook has been relentlessly replicating Snap's most popular features, but perhaps it's time for the tables to turn. Last month, Facebook began testing a similar change: separating social updates by friends and family from media content by publishers. The test was limited to a number of smaller countries, but publishers in those countries noticed immediate and significant dips in traffic.

Facebook is partially to blame for that, as it didn't communicate the change upfront to users, and only clarified what was happening after the fact in a blog post. If users had no idea that their News Feeds were changing so dramatically and they would need to visit a new Explore section to get publisher content, it's no wonder publisher traffic took a hit.

The big difference is that Facebook has a huge and stable business, so it needs to tread carefully with any major product changes, and News Feed is its most important product by far. It needs to test changes before broad deployments (although this doesn't excuse the lack of communication to affected users). Snap, on the other hand, is already struggling with its ad business and other important operating metrics like daily active user (DAU) growth.

In other words, Facebook and Snap have vastly different risk/reward profiles for separating social from media. Facebook has much more downside risk if the change backfires, while Snap has less to lose and more potential upside if it can spur DAU growth with these changes. Desperate times call for desperate measures.

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Evan Niu, CFA owns shares of Facebook and NFLX. The Motley Fool owns shares of and recommends Facebook and NFLX. The Motley Fool has a disclosure policy.