Snapchat Rethinks Its Redesign

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It looks like Snap (NYSE: SNAP) is backpedaling on its Stories redesign.

Just like Facebook (NASDAQ: FB) whose news feed defaults to Top Stories instead of Most Recent, Snap changed its Stories algorithm to sort posts based on the users you interacted with the most rather than most recently. Because Instagram and Twitter also have a similar setup, and it reportedly has helped lead them to growth, Snap altered its feed, but people seem to hate the redesigned feed.

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Although CEO Evan Spiegel had been adamant users would love the change after they got used to it, what seems to be changing is Snap's resolve. Reports are emerging that for some users anyway, Snapchat Stories are appearing in non-chronological order again.

A costly experiment

The number of app downloads jumped last quarter and its fourth-quarter earnings report showed the number of daily active users increased 8.9 million to 187 million an 18% gain over the year-ago period and the first time in two years it posted higher growth rate.

While the buzz around product changes might be giving consumers a reason to try the platform, that tinkering seems to be irritating its core user base -- particularly power users like Kylie Jenner. The influencer said she was "so sad" about the change and she hardly used the app anymore. The star still uses the app, but she seemed to voice frustrations a lot of Snap's average users were also having.

Social media is typically used to discover what people we know are doing now, not what they did hours ago. The change, however, represented Spiegel's view of how he thought the app should best be used, rather than how it's actually being used. For example, when users complained that Snap's walling off celebrities from friends and family made them feel like they're no longer friends, Spiegel responded, "Exactly. They're not your friend."

But Snap seems to be waking to that fact by giving some people at least the option to experience the app the way it used to be. Whether it is part of a planned rollback or not is unknown, but it may not matter. It could be a case of too little, too late.

Instagram, like Snap, only better

Snap is suffering from multiple self-inflicted wounds. Its PR problems may not be as widespread as Facebook's at the moment, but from the app redesign to running distasteful ads Snap isn't in a position where it can afford negative fallout for anything it does. Since it continues to lag far behind Facebook and Instagram in users, Snap needs to develop some positive momentum if it wants to convince the market it can survive.

Instagram, for example, continues to poach Snapchat's best ideas. TechCrunch recently reported it is testing Nametags, a feature similar to Snap's Snapcodes, that allow users to create custom images to scan to make it easier to follow people. The site suspects that after Snap segregated celebrities and businesses to its Discover section, Instagram developed a similar feature to allow them to promote themselves more easily on its app. Instagram might not only be stealing designs, but soon, perhaps, influencers, which could disappoint users.

Equally important, despite Snap having supposedly made it easier for advertisers to profitably market themselves on the site by incorporating a number of tools to assist in ad creation, my colleague Adam Levy lays out how, in comparison to Facebook and Instagram, marketing on Snap requires a lot more work for advertisers. Considering Snap generates substantially all of its revenue through advertising, that's a big problem.

More worrisome may be that app traffic is reportedly plummeting. Spiegel said Snapchat generated over $100 million in revenue for its content partners last year, but New York Magazine reports some of them are seeing their traffic drop by half following the redesign. That's not surprising since Snap segregated their feeds, but they might become frustrated that Snap is no longer generating the same amount of revenue for them this year as a result.

Hit or miss approach

Since Snap hasn't commented on the design re-testing, it's unknown whether the change will be permanent.

Facebook gives you the option of changing to a recent timeline feed instead of always relying upon the algorithm, even if there's no way to permanently select the option as the default.

Snap could also give users the power to control what they saw and when, allowing new users a chance to try on Spiegel's idealist version without alienating long-term users.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Facebook. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.