Snapchat Parent Shares Slump On Advertising Fears

Shares in Snapchat parent Snap plummeted more than 38 percent in early trading on Friday, after it announced disappointing quarterly earnings after the close of trading the previous day and warned of “incredibly challenging” conditions.

Shares in other social media firms also dropped sharply in early Friday trading, with Facebook parent Meta declining more than 7 percent, Google parent Alphabet down more than 5 percent and Pinterest down more than 14 percent.

Alphabet is scheduled to report its earnings on Tuesday and Meta on Wednesday.

Twitter, which disclosed its quarterly earnings on Friday morning, fell in pre-market trading but opened roughly flat.

Privacy changes

Snap usually reports its results before other major social media companies, such as Twitter, Google parent Alphabet and Facebook parent Meta, and as such is seen as an indicator for such firms, which derive the bulk of their revenues from advertising.

In this case, Snap said advertisers had cut spending for the three months to the end of June due to supply chain disruptions, rising costs and labour shortages.

In addition, privacy changes to Apple’s iPhones and iPads, wider economic challenges and increased competition for advertisers from rivals such as TikTok “substantially slowed” Snap’s revenue growth, the California-based company said.

It reported revenues for the quarter of $1.11 billion (£926m), missing analysts’ expectations of $1.14bn.

User growth

The figure represents a 13 percent increase from the same quarter a year earlier. Snap said the current third quarter was flat year-on-year.

At the same time, daily active users of Snapchat grew 18 percent to 347 million by the end of June, beating forecasts of 344 million.

This was similar to Twitter, which also reported disappointing advertising revenues in spite of a substantial increase in active users.

“While the platform’s user base remains strong, Snap’s ad-centric model is no longer a sure bet and is especially volatile heading into a period of economic headwinds where marketers are sure to pull back their ad spend,” said Forrester research director Mike Proulx in a research note.

‘Not satisfied’

Snap said it would reduce hiring, expand its advertising business and find new sources of revenue.

“We are not satisfied with the results we are delivering, regardless of the current headwinds,” the company said.

It declined to make a revenue forecast due to “incredibly challenging” conditions.

So far this year shares in Meta have fallen 46 percent, Alphabet 21 percent, Apple 15 percent and Netflix 62 percent.

Matthew Broersma

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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