Los Angeles Times

Snap forecasts first quarterly sales drop

- By Alex Barinka Barinka writes for Bloomberg.

Snap is forecastin­g its first ever quarterly revenue decline, citing a flurry of changes to Snapchat’s advertisin­g products that may be disruptive to the social media app’s business.

Revenue is projected to drop 2% to 10% in the first quarter from a year earlier, the company said in a statement. That’s below the average analyst estimate for growth of 1.48%.

Snap is making changes focused on its direct-response business — ads that prompt users to take an immediate action such as buying a product or signing up for an email list. That’s been a key piece of the company’s moneymakin­g operation, especially in recent quarters when economic uncertaint­y has led marketers to cut back on spending.

In the current period, Snap has seen a 7% decline in revenue compared with a year earlier, according to a letter to investors.

Snap fell as much as 16% in after-hours trading. The stock has lost almost twothirds of its value in the 12 months through Tuesday.

Snap and its competitor­s such as Meta Platforms’ Facebook and Alphabet’s Google are also still grappling with a change to iPhone privacy policies from Apple that made it more difficult to personaliz­e and track the success of ads on their apps. Shares of Meta and Pinterest fell after Snap’s results.

In the fourth quarter, Snap saw revenue of $1.3 billion — flat from a year earlier, in line with the average analyst estimate compiled by Bloomberg. It was the company’s first-ever reported quarter of no growth.

The company posted a net loss of $288.5 million, or 18 cents a share, including $34 million in charges from its workforce restructur­ing. That compared with a profit of $23 million, or 1 cent, a year earlier.

Snap ended the fourth quarter with 375 million daily users, for a 17% increase. In the first three months of the year, the company estimates that 382 million to 384 million people will use its platform daily.

Snap has become a bellwether for other digital advertisin­g companies. Last year, it was the first to raise concerns about the slowdown in marketer spending online and to fire a significan­t number of employees — 20% of its workforce — to cut costs amid falling revenue.

In the first quarter, Snap expects the environmen­t to “remain challengin­g as we expect the headwinds we have faced over the past year to persist.”

Investors will get more informatio­n about the state of the digital ad market when Meta and Alphabet report earnings later this week.

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