Snap posts slowest-ever rate of quarterly growth
Snap, the maker of the messaging app Snapchat, on Tuesday posted its slowest-ever rate of quarterly growth and projected that its sales for the current quarter would fall, in another sign of the tech industry’s slowdown.
Revenue was $1.3 billion for the fourth quarter, up 0.1% from a year earlier. The company also swung to a net loss of $288 million, as spending increased nearly 20% from a year earlier. Snap had reported its first and only quarterly profit as a public company a year ago.
Snap’s challenges appear to be mounting. In a letter to investors, the company said revenue so far in the current quarter had declined 7% from a year earlier. It added that its internal forecasts for the current quarter assumed that revenue would fall between 2% and 10%, which would be its first revenue drop as a public company.
In an earnings call, Evan Spiegel, Snap’s CEO, said that “advertising demand hasn’t really improved, but it hasn’t gotten significantly worse.” He had earlier added in a statement that Snap continued to “face significant headwinds as we look to accelerate revenue growth.”
The company’s shares plunged more than 14% in after-hours trading
Tuesday. Last year, Snap’s share price fell more than 80%.
The results cap a difficult year for Snap, with little relief ahead. Persistent inflation and high interest rates have made advertisers — the company’s main source of revenue — reluctant to spend, while privacy changes by Apple have made it more difficult for social media companies to track and target
users in their mobile advertising.
TikTok has also stolen advertising business from Snap and other platforms. The Chinese-owned video app, which Snap has called one of its “very large and very sophisticated competitors,” has attracted brands with its reach and cultural cachet, particularly among young people.
Digital advertising has slumped along with the global economy. But Snap has struggled more than its rivals because advertisers tend to begin budget cuts with smaller companies, instead of juggernauts like Facebook and Instagram, said Kelsey Chickering, a principal analyst at Forrester. In August, Snap laid off 20% of its employees, discontinued at least six products and lost several executives.
“Marketers are nervous about their economic outlook,” Chickering said. “They’re moving their budgets into places that are proven to be effective.”
One potential bright spot for Snap was its user growth, with daily active users increasing 17%, to 375 million in the fourth quarter. Even so, that was slightly less than the 378 million users that Wall Street analysts had predicted.
In the earnings call Tuesday, Derek Andersen, Snap’s chief financial officer, said the company could still grow its advertising business through features like its TikTok clone, Spotlight. But, he added, advertisers had to use those features.
“Demand is the lacking portion of things,” he said.