Snap, the parent company of Snapchat, lost $573 million over the last three months – up 400 per cent in the same period last year – as its advertising business slowed.
The Los Angeles-based company’s revenues grew six per cent to $1.79 billion, which fell slightly below analyst expectations of $1.81 billion and represents the slowest growth since Snap went public five years ago.
In a letter to investors, Snap said that advertisers were continuing to cut marketing budgets due to macroeconomic forces beyond its control, such as inflation pressures and rising costs of capital. Snap also placed some of the blame on increased competition and changes to Apple’s privacy rules that have made it harder for apps to target advertising and measure campaign success.
Snap’s share price fell by more than 25 per cent following the announcement. They had already lost 77 per cent of their value in the year to date.
“While these results are far from our aspirations, we are using this period of reduced demand to pull forward and accelerate changes to our advertising platform and auction dynamics that we believe will deliver better results for our advertising partners over the long term,” Snap said.
Evan Spiegel, Snap’s CEO added:
“This quarter we took action to further focus our business on our three strategic priorities: growing our community and deepening their engagement with our products, reaccelerating and diversifying our revenue growth, and investing in augmented reality.
“The growth of our community to 363 million daily active users, an increase of 19% year-over-year, continues to expand our long-term opportunity as we navigate this volatile macroeconomic environment.”
Snap also undertook a radical restructuring program during the quarter, spending $183 million and laying off one-fifth of its 6,500-strong workforce, as well as cutting investment in initiatives such as its AR glasses and video content production.
Snapchat’s daily active users grew 19 per cent, however, to 363 million. The company also said that the total time watching Spotlight content grew by more than half. Snapchat+, the company’s subscription service for exclusive, experimental, and pre-release features, reached over 1.5 million subscribers in Q3 and is now offered in over 170 countries.
There were some advertising highlights for the company, including partnerships with Walmart Connect and American Eagle. The latter used the company’s Shopping Lenses that lets users engage with and purchase items in augmented reality, driving more than 11 million impressions with an average playtime of “nearly 30 seconds.”
Furniture retailer Skeidar developed a Lens where Snapchatters can explore outdoor furniture in AR, resulting in an increase of +21 points in brand favourability and +14 points in action intent, which in turn drove a 14x increase in return on ad spend.
Snap is not alone in its struggles, however. Following the company’s announcement, shares in Meta and Google parent company Alphabet dropped five and three per cent, respectively, showing that the markets are lacking confidence in social media advertising platforms. Pinterest’s shares tumbled by more than seven per cent.
