Snap’s revenue growth slows further amid tech slowdown
Snap, the maker of messaging app Snapchat, posted its slowest-ever quarterly growth rate on Tuesday and forecast sales for the current quarter would fall, another sign of the tech industry’s slowdown.
Revenue was $1.3 billion in the fourth quarter, up 0.1% from a year earlier. The company also reported a net loss of $288 million as expenses rose nearly 20% from a year earlier. Snap reported its first and only quarterly profit as a public company a year ago.
Snap’s challenges seem to be piling up. In a letter to investors, the company said revenue for the current quarter was down 7% from a year earlier. It added that its internal forecast for the current quarter assumed revenue would fall between 2% and 10%, which would be its first drop in revenue as a public company.
On an earnings call, Evan Spiegel, chief executive of Snap, said “ad demand hasn’t really improved, but it hasn’t gotten significantly worse.” He previously added in a statement that Snap continues to “face significant headwinds as we seek to accelerate revenue growth.”
Shares of the company plunged more than 14% in after-hours trading on Tuesday. Last year, Snap’s stock price fell more than 80%.
The results cap off a difficult year for Snap, with little relief to come. Persistent inflation and high interest rates have made advertisers – the company’s main source of income – reluctant to spend, while Apple’s privacy changes have made it harder for social media companies to track and target users in their mobile advertising.
TikTok also stole ad business from Snap and other platforms. The Chinese-owned video app, which Snap called one of its “very important and very sophisticated competitions”, has attracted brands with its reach and cultural cachet, especially among young people.
Digital advertising has collapsed along with the global economy. But Snap is having a harder time than its rivals because advertisers tend to start budget cuts with smaller companies, instead of behemoths like Facebook and Instagram, said Kelsey Chickering, 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,” Ms. Chickering said. “They’re shifting their budgets to places that have proven effective.”
A 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.
During Thursday’s earnings call, Derek Andersen, Snap’s chief financial officer, said the company could still grow its advertising business with features like its TikTok clone, Spotlight. But, he added, advertisers had to use these features.
“Demand is the missing part of things,” he said.