March 29, 2024

Snap Shares Fall 25% As Revenue Growth Slows

On Thursday, Snap Inc. painted a rather grim picture of the impact of a slowdown in the economy on social media. The company also declined to make a forecast, as it said that the conditions are very challenging, which pushed its shares down by 25%. It also set off a chain reaction amongst other social media companies.

Snap’s results

The owner of Snapchat said that there are labor shortages and supply-chain disruptions that many advertisers are facing, while the rest are dealing with rising costs because of the surge in inflation. This has resulted in a decline in spending on ads.

Based in Santa Monica, California, the company said that it would slow down its hiring significantly and also make more investments in its advertising space. Moreover, the company added that it intended to find new sources of revenue that can help it grow at a faster pace.

After the results by Snap Inc., almost $80 billion was wiped out in the combined stock market value of other companies that also sell ads online. These include Google’s parent Alphabet Inc. and Facebook’s parent Meta Platform Inc. Snap was the first of the prominent tech companies to post its second-quarter earnings.

Slowdown in revenue

Investors expect social media companies to see their slowest-ever pace of growth in terms of ad revenue in 2022 because brands are expected to have reduced their marketing budgets amidst economic woes like high inflation.

The revenue of Snap Inc. for the second quarter that ended on 30th June was about $1.11 billion, which missed forecasts from analysts that predicted it to be around $1.14 billion. There was a 13% growth in the figure, as compared to the same quarter of the previous year.

The company disclosed that revenue in the current quarter so far remains flat, as opposed to last year. It further said that they were not satisfied with the results, no matter what the current headwinds may be. Snap Inc. stated that macroeconomic challenges, the recent changes made in iPhones’ privacy settings, and increasing competition for ad spending have caused a slowdown in revenue.

Growth and investment

There was an 18% increase in daily users of Snapchat as opposed to last year and they reached 347 million. Estimates had expected this number to be around 344 million. The company has also been making heavy investments in ads and augmented reality technology. However, this new kind of advertising is the first thing that is foregone when companies reduce their marketing budgets.

On Thursday, the company also said that they planned on introducing a share buyback program of about $500 million. Snap Inc.’s chief technology officer Bobby Murphy and its chief executive officer Evan Spiegel have agreed to continue in their positions until January 1st, 2027.

They will be paid a salary of $1 and will not be provided any equity compensation either. This is meant to keep the costs of the company under control, especially at a time when it needs to make more investments.

Leave a Reply

Your email address will not be published. Required fields are marked *

Previous post Stocks Rise For Fifth Session After ECB Rate Hike
Next post Stocks Rise As Traders Focus On Earnings To Counter Downturn Worries