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Snap Shares Plunges on Slowest Sales Growth But Adds New Users

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Snap Shares Plunges on Slowest Sales Growth But Adds New Users

(CTN News) – A decline in advertising spending continues to weigh on Snap Inc.’s quarter-over-quarter sales growth. In late trading, Snap shares plunged 27%.

Snapchat’s third-quarter sales increased by 6% to $1.13 billion. According to NYTimes projections, analysts’ average estimate of $1.14 billion is just shy of analysts.

In August, the company announced it would cut 20% of its workforce and slash projects that don’t contribute to user or revenue growth or augmented reality efforts. Snap blamed the changes on a slowdown in marketer spending for plunging sales.

According to Snap’s prepared remarks for investors, revenue growth “continues to be impacted by several factors, including platform policy changes, macroeconomic headwinds, and increased competition.”

Especially in light of operating environment headwinds, inflation-driven cost pressures, and rising capital costs, we’re finding that our advertising partners are cutting marketing budgets across many industries.”

Snap stock fell as low as $7.78 in extended trading from $10.79. Snap Shares are down 77% since January.

Snapchat, which sends disappearing messages and enhances videos with effects, reported 363 million daily active users in the quarter, up 57 million from a year earlier. 358.7 million was the estimate.

Snap’s average revenue per user fell 11% to $3.11, missing analysts’ average projection of $3.19.

In a key US market, users spent 5% less time watching content. The company said that American Snapchatters aren’t watching as many stories from their friends. Advertisers might be worried about that trend.

As a result of the economic downturn, marketing teams are feeling pressured to prove ROI on every single line item, and they’re going to consolidate spending to fewer, stronger channels and partners,” Kelsey Chickering, Forrester analyst, said.

As marketers shift into more efficient and proven channels, Snapchat’s share of advertiser budgets will likely shrink further.”

Revenue-boosting efforts are the company’s top priority.

Snapchat+ grew to 1.5 million users during the third quarter

Snap said Thursday that its nascent subscription service, Snapchat+, grew to 1.5 million users during the third quarter. Also, the app maker is improving its ad measurement tools.

Snap lost $360 million in the quarter, or 22 cents per share. Loss includes $155 million in restructuring costs. Snap approved a $500 million share repurchase plan over the next 12 months.

Analysts were watching Snap for clues about other ad-dependent social media companies. Meta Platforms Inc. and Alphabet Inc. report next week.

There’s a shrinking pool of advertising dollars for Snap, Facebook, and Google. Inflation is putting pressure on companies and consumers.

Advertisers have difficulty measuring and managing their ad campaigns due to new rules from Apple Inc. that require all apps to get smartphone users’ permission to track them online.

Following Snap’s report, shares of Meta, Alphabet, and Pinterest Inc. fell.

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