I feel like the update's goal was to mainly:

1. Make app more usable and more appealing to older demographic (not just teens)

2. Optimize revenue by allowing advertisers to sneak into the main page in between stories. As you said, by putting stories so close to private snaps, the engagement is somewhat forced.

It really sucks when major design decisions must be made to keep investors happy, but hopefully Snapchat can continue to deliver interesting ideas and not stray too far away from what made them special in the first place.