Snap plans major Snapchat redesign as losses widen, Tencent buys stake

Snapchat parent company Snap announced that it was working on an overhaul of the popular photo and video messaging application after it reported losses of more than $400m in its last trading quarter.

Snapchat said the changes would make the application easier to navigate and increase its compatibility with Android devices to address its struggles attracting new users and turning a profit.

"There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term, and we don’t yet know how the behavior of our community will change when they begin to use our updated application," said chief executive Evan Spiegel who became the world's youngest billionaire in 2015.

"We're willing to take that risk for what we believe are substantial long-term benefits to our business."

In a vote of confidence, Chinese internet giant Tencent announced on Wednesday that it had taken a 10% stake in Snap after picking up almost 145.8m non-voting shares on the open market throughout the quarter, but the Californian firm warned that the transition could still be one of instability.

Snap, which describes itself as "a camera company", brought in $207.9m in revenue over the three months leading to 30 September, falling considerably short of the $236.9m anticipated, due in part to its user numbers also falling 3.8m short of expectations at 178m.

The company also lost $39.9m as a result of almost 300,000 pairs of unsold Snapchat Spectacles.

In total, Snap ended the quarter with a net loss of $443.2m as Instagram's 'Stories' function and WhatsApp's 'Status' feature surpassed the firm in user numbers, despite being an imitation of its core product.

"We're learning from it and plan on avoiding a similar mistake in the future," Spiegel said.

Snap shares dived in premarket trading but after the Tencent intervention were up 1.96% to $15.12 each.

Analysts Jordan Hiscott at Ayondo Markets said that investors were likely to be concerned around decreased daily users and the complete redesign of the app.

"We can also expect significant costs associated to this," he added.

"Unfortunately the company faces an ongoing battle of trying to remain relevant in a highly competitive market, with both Facebook and Instagram poaching some of Snapchat’s best features.”