>> Snap Inc., parent company of mobile app Snapchat, revealed on Wednesday that Chinese tech investment firm Tencent bought a 12% stake in the company. Tencent's holding in Snap Inc., was disclosed in a regulatory filing. Despite the news, Snap's stock still in the red Wednesday, down 18%. The sell off started Tuesday, after the company's quarterly earnings showed disappointing user growth.
Reuters technology correspondent Dave Ingram, in San Francisco.>> Snapchat has long been popular among millennials, especially in relatively affluent countries, including the United States. The company has realized that it is a difficult app to use for a lot of people. And it's saying that it's going to launch a redesign.
Any time a tech company changes its product, it runs the risk of alienating its core users. This has been a big problem with Twitter, where there are very devoted users of Twitter, and any time the company makes a small change some of the users rebel. Snap has to walk this balance of keeping the appeal to that core audience while trying to expand, and bring in millions of new users.
>> Snap's daily active users stood at 178 million in the third quarter, below expectations. Compare that to Facebook which claimed 1.37 billion daily active users in the same period. Wednesday's investment does not give Tencent voting rights in Snap, signaling the Chinese firm may not be preparing for a merger, but is simply betting that Snapchat's share price will rise.
Tencent is no stranger to the US market, it bought a 5% stake in Tesla for $1.8 billion this year, and has also invested in ride-hailing service Lyft.