Snap picked up a big backer in Saudi Arabia's Prince Alwaleed bin Talal, who announced soon after the second-quarter results he had bought a 2.3 percent stake for $250 million in May.
The company said users logging in at least once a day dropped for the first time, hitting 188 million over the three months ending June 30, down from 191 million earlier this year.
The Los Angeles-area company beat Wall Street's expectations for both revenue and losses, and its share price surged by more than 13% on the news in after-hours trading to almost $15, before briefly stabilizing around $14 - an overall gain of about 6%.
The news was revealed in Snap's quarterly earnings, and the company may survive for a while longer - the company has been able to extract more money from their fading user population, earning $262 million in revenue, but still making a $353 million loss. Snap stock was trading at just over $13 a share ahead of Tuesday afternoon's report, down from a 52-week high of $21.22. Revenue was forecast at $251.2 million. This is over 20pc lower than the previous quarter, when Snap lost $443,093. The main reason for this was the controversial app design change.
With self-service ads, Snap has been able to grow revenue in regions such as Australia and the Middle East, where direct sales efforts are more limited and advertisers have few other options to market to its mainly 18-34-year-old users. Snap declined to estimate user growth for next quarter, but noted that third-quarter earnings have historically "trended down" for the company.
Analysts on average expected Snap to gain almost 2 million users in the second quarter from the first.
Snap's CEO Evan Spiegel blames the two percent decline in daily active users to "the disruption caused by our redesign". "It has been approximately six months since we broadly rolled out the redesign of our application, and we have been working hard to iterate and improve Snapchat based on the feedback from our community".
Snap lost about 1 million users in each of its three geographic reporting regions: North America, Europe and rest of world. Overall, the company posted a loss of $353m, or 27 cents a share, compared with a loss of 36 cents a share a year ago.