Yesterday Snap said it was altering its redesign, and today the stock is plunging

Key Points
  • Snap shares declined as much as 8 percent Wednesday after news it was altering its Snapchat redesign.
  • The updated redesign will mix user and celebrity, brand and publisher Stories together, similar as how it used to function before the first tweak.
Snap's stock plunges after announcing changes to said redesign
Snap's stock plunges after announcing changes to said redesign

Snap shares declined as much as 9.5 percent one day after the company announced it was testing redesigning its Snapchat redesign.

The company said late Tuesday it was tweaking its updated Snapchat format, which it began rolling out last year. The new version would put user-generated Stories with publisher, brand and celebrity content on the same tab, which mimicked how the platform used to work.

Although content from different sources would live in the same area on the Discover section, there will be a clear distinction of friend content, which will be placed at the top. Chats and Story posts would still be separated.

A company spokesperson told Recode, "We are always listening to our community and will continue to test updates that we hope will give Snapchatters the best possible experience on our platform."

Some celebrities have been critical of the redesign, which separated friend content from other types of snaps. Kylie Jenner said in February she no longer opened Snapchat after the redesign, which caused shares to drop 7 percent and cost the company more than $1 billion in market capitalization at the time.

EMarketer analyst Debra Aho Williamson told CNBC the Snapchat redesign hasn't been very popular, but the fact it is making changes now could be a good thing. The firm still projects Snapchat will reach $1.4 billion in advertising revenue this year, double last year.

"I think this is a positive sign because it shows they are listening to their users," she said.

The shares also moved after competitor Twitter dropped sharply. Shares were down as much as 5 percent after Twitter softened expectations for revenue in the second half of 2018, despite a strong earnings beat that let the company achieve profitability for the second quarter in a row.

"I think there's a worry that just given some of the advertising gains from Twitter as well as just user growth, that there's a theme building that Snap's continuing to lose out on demographics engagement as well as share," GBH Insights chief strategy officer Dan Ives told CNBC.

He also said Twitter's low guidance and the fact shares are dropping shows investors are getting wary of social media.

"It's a share game story," Ives said. "It's not a winner-takes-all space so I think you're just seeing nervousness around social media stocks."

--Sara Salinas contributed to this report

Disclosure: CNBC parent NBCUniversal is an investor in Recode's parent Vox Media and Snap.