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Snap’s Advertising Woes Continue To Widen

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Snap's Advertising Woes Continue To Widen

(CTN News) – As Snap undergoes a radical restructuring in response to challenges around advertising targeting and a broader advertising slump, revenue growth slowed and losses ballooned.

Revenues rose 6 percent year-on-year to $1.13bn, slightly below analysts’ expectations and at the slowest pace since it became public in 2017.

In line with expectations, net losses increased 400% to $360mn from $72mn last year. Including $155m in charges related to a drastic restructuring that included laying off a fifth of its 6,500-strong workforce and slashing investments in things like augmented reality glasses and video content.

Snap, parent company of Snapchat, said advertisers are cutting marketing budgets due to inflationary pressures and rising capital costs.

Also, Apple’s privacy changes have made it more difficult for apps to target advertising and measure campaign success.

Snap’s shares, which had already lost 77 percent in the year to date, fell more than 25 percent after the earnings report.

Despite Snap’s bleak results, other companies reliant on advertising revenue could report similar pain in the coming weeks.

Google parent Alphabet and Facebook parent Meta fell 5 percent and 3 percent, respectively, while Pinterest fell more than 7 percent. Although these results don’t meet our expectations, Snap is pulling forward and accelerating changes to its advertising platform and auction dynamics.

These changes will work better for our advertising partners in the long run,” Snap said. While the company didn’t provide revenue or earnings guidance for the current quarter because of “uncertainties related to the operating environment”, it said revenue had grown 9 percent.

As the year progresses, Snap expects revenue growth to slow. Taking flat growth into account, it estimated adjusted earnings before interest, taxes, depreciation and amortization of about $200mn.

The chief executive of Snap, Evan Spiegel, said: “This quarter, we focused on our three strategic priorities: growing our community and deepening their engagement with our products, accelerating our revenue growth, and investing in augmented reality.”

The company said that daily active users shot up 19 percent to 363 million. A $500mn stock repurchase program was also announced.

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