In case you have not heard, Snap (NYSE: SNAP) is making some important changes to your application. The first revisions are tough, but the administration expects to implement the redesign for all by the end of the first quarter of 2018.
The biggest change in the application is the separation of snapshots and stories of your friends from content provided by third parties. Party and celebrity editors. A big fear is that Snapchat's Discover section will lose a lot of traffic once the deployment is complete. Discover collects content from third-party publishers in exchange for sharing the advertising revenue of the ads sold with the content; it is an important source of income for Snap. The measure could also reduce the amount of stories that people see, another important source of income.
It seems that Snap could have similar fears about Discover and Stories now. The company has just laid off two dozen employees, mostly from the company's content division, according to a Cheddar report. These are the people in charge of curating the content of Stories and Discover. This could be an early warning that the CEO of short-term disruption Evan Spiegel warned could be the result of the redesign of Snap's shareholders.
No one is watching Discover or use Snap Maps
Filtered data about Snapchat users found that only 20% of the 178 million active daily users of the application will see Discover content on a given day. Snap does not share that information with publishers, so filtering could have a big impact on its ability to attract new content partners. In combination with the redesign of the application that could harm the Discover audience, things do not look good for Discover. That could explain the need for a smaller content team.
If you want to see it from a half-full glass perspective (or maybe just a full room), Snapchat's redesign implements an algorithmically ordered breakthrough for Discover content. That could allow Snap to increase the amount of time users consume when discovering videos, at least for those who go to the Discover section. It also means that Snap does not necessarily need to increase the number of content partners for Discover to increase watch time.
Even fewer users use Snap Maps, a feature that selects content based on locations. The data shows only an average of 19 million users accessing the function. Curating content requires human editors, so layoffs do not really bode well for features like Snap Maps and Our Stories, which collect user-generated content around events. That's particularly overwhelming for Snap considering he spent $ 250 million on an acquisition to accelerate the release of Snap Maps.
In a memo to employees, Spiegel wrote that he wants the company to focus on things that scale, not on things that only make the company bigger. For example, Discover scales much better than Our Stories or Snap Maps because it does not require editors to check content manually 24 hours a day, 7 days a week. That said, he specifically called the content team an "obvious warning" to his desire to scale products. So, it's very curious why about a dozen people on the team were fired shortly after the memo came out.
Much uncertainty in Snap
Snap has consistently exceeded analysts' expectations every quarter since it became a publicly traded company. The implementation of the Snapchat redesign only adds more uncertainty to Snap's performance, and the recent round of layoffs adds another layer of question marks.
The redesign may end up benefiting the company in the long term. It could focus users on more scalable functions that produce higher profit margins, and could allow Snap to run a team of simpler content engineers and editors. But in the short term, it certainly seems to be causing a lot of problems for the company. It is not yet clear whether Snap will emerge from these issues as a company that can revitalize the growth of its users and the growth of revenues and, finally, turn both into profit.
Adam Levy does not have a position in any of the actions mentioned. The Motley Fool has no position in any of the actions mentioned. The Motley Fool has a disclosure policy.