Snapchat's Update And Redesign Is Turning Users Off

This article originally appeared in the Motley Fool.

On Snap's (NYSE:SNAP) third-quarter earnings call, CEO Evan Spiegel told investors that Snapchat will undergo a major redesign to simplify the app for new users. That redesign is widely available in a few countries, including the U.K, Canada, and Australia. The early reviews are in, and the overwhelming majority of users are not fans.

83% of user reviews for the redesigned app are negative, giving it one or two stars, according to data from SensorTower and reported by TechCrunch. The redesign aims to "separate the social from the media" by putting content from friends in one section of the app and content from everyone else in another section. It also algorithmically sorts Snaps and Stories to show the content you most likely want to see at the top of the feed.

But users are complaining the changes make the app harder to use. You can no longer watch a continuous stream of your friends' Stories, and Stories are interspersed with individual messages, making it difficult to distinguish between the two. Clearly, there's still a lot of work to do.

Ruining What's Working

The most popular feature on Snapchat is watching Stories. While leaked data from The Daily Beast shows the number of users creating Stories on Snapchat isn't increasing, more and more users are viewing Stories. In fact, more users watch Stories than send and receive regular Snap messages on most days.

That behavior makes perfect sense in light of the success of Facebook 's (NASDAQ:FB) efforts to co-opt the Stories feature in Instagram, WhatsApp, Messenger, and its flagship app. Users can easily create Stories in those apps, but they go to Snapchat to consume more of the content format.

But the redesign makes it a lot harder to consume Stories. For one, the ability to auto-advance to the next Story is gone. Even more egregious is that Stories from friends (people that follow you back on Snapchat) are on the same section as messages, but Stories from people who don't follow you, like celebrities or organizations, are in another section. It does keep Spiegel's promise to separate users' social life from their media consumption, but it overlooks exactly how people like to use the app.

The redesign could push some users to check out Stories more often, but it could reduce the average number of Stories viewed per user as Snapchat makes it more cumbersome to view all the Stories available.

Stories Is The Revenue Driver

Stories is the best format for Snap to push in order to scale its revenue. Ad formats like sponsored lenses and geofilters are less accessible to small advertisers, and they have limited reach, according to the data leaked by The Daily Beast. The Snap Ads interspersed in Stories and the Discover section are Snap's most scalable ad format.

Anything that hurts Story consumption is going to hurt Snap's ability to reach the lofty expectations set by Wall Street. We already saw that after Instagram Stories blew up in popularity, negatively affecting Snapchat's user growth and the number of users producing Stories.

Redesigning the app to make it harder to view Stories means fewer Snap Ad impressions. Snap could offset a decline in impressions with higher average ad prices. So far, though, the self-serve platform for buying Snap Ads has resulted in lower average ad prices as marketers are able to bid what they see as fair value for Snap Ads. Unless Snap can show the app redesign produces higher value for advertisers (perhaps removing auto-advancing means users are paying more attention), it will likely continue to experience a decline in average ad pricing as it shifts all of its ad purchases to the self-serve platform.

Don't Say He Didn't Warn You

When Spiegel announced the app redesign he said, "There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term." Obviously, he believes it will benefit the company in the long run perhaps by reigniting user growth or the number of users actually creating Stories on the platform. That remains to be seen, though.

For now, it looks like the redesign is only making things worse, and it's a huge risk for a company that's already facing some major challenges.

Adam Levy has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.