In its Q1 earnings report for 2025, Snap Inc. revealed it is ditching a planned "simple" redesign of the Snapchat app's navigation after user testing showed core Snapchatters were not fans. The company had been experimenting with a layout that cut the main navigation bar down to just three tabs, focusing on Stories, the Camera, and the TikTok-like Spotlight video feed.
Turns out, longtime users really like the traditional five-tab setup. In the investor letter, Snap explained its most active users consistently preferred having separate tabs for things like the Map and dedicated content sections. This suggests the company is listening to its loyal base, perhaps remembering the backlash from a big redesign back in 2018 that also saw users leaving the app.
Instead of the three-tab simplicity, Snap is now trying out a tweaked five-tab version. This new layout aims to blend the best of both worlds by bringing more Stories into the messaging area and placing Spotlight right next to the Camera button for easier access. The company is iterating thoughtfully on the user experience.
This news about walking back the simple design comes as Snap reported a slip in its North American user numbers. Daily active users, or DAU, in North America dipped to 99 million in the first quarter of 2025, down from 100 million in the prior quarter. Snapchat's user base in this key region has basically held steady at around the 100 million mark for roughly three years now, so any drop gets noticed.
Globally, though, Snap's community is still growing strong. Total DAU reached 460 million in Q1, up 38 million from a year ago and 7 million just since last quarter. The growth is mainly happening outside of North America and Europe, particularly in less mature markets adopting visual communication.
Financially, the picture is quite positive, contrasting with the North American user softness. Snap posted total revenue of $1.36 billion, a solid 14% increase compared to the same time last year. This jump was largely fueled by the advertising side of the business and the paid Snapchat+ subscription service. Advertising revenue hit $1.21 billion, up 9% year over year. Direct Response advertising, which is focused on driving specific actions like sales or sign-ups, was a big winner, growing 14% and making up 75% of all ad revenue for the first time.
Snapchat+ continues its impressive run, reaching nearly 15 million subscribers and pulling in $152 million in revenue for the quarter, a 75% surge year over year. The company is also showing improved financial health overall. It reported Adjusted EBITDA of $108 million, a big jump from $46 million a year prior, and the net loss shrank significantly to $(140) million from $(305) million. Snap also generated a healthy $114 million in Free Cash Flow.
The company is attributing this improved profitability and cash generation to better revenue growth combined with keeping a tighter lid on expenses. It is also leaning into innovative ad formats like Sponsored AI Lenses. If you don't know what those are, Snap is using generative AI to let brands create interactive Lenses that users can play with, like inserting their face into AI-generated scenes. The company thinks these could help brands reach more people and potentially even go viral. Early tests with companies like Uber and Tinder showed users spending more time with these AI Lenses compared to regular ones. You can find the full investor letter (in PDF format) here.
Source: The Verge
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