2022 is going from bad to worse for Snap Inc.
In a much anticipated Q3 earnings report, Snap disappointed investors by posting the worst year over year revenues growth in its 11 year history. Worse still, Snap reportedly said it expected no revenue growth for the final quarter of the year, a sour note which sent the company’s stock plummeting around 30%. Snap blamed the lacklustre figures on rising inflation and the war in Ukraine, though a sustained digital advertising slowdown and the downstream effects of Apple’s App Tracking Transparency also played a part.
Snap saw its revenues increase by just 6% year-over-year while simultaneously posting net losses of $US359 ($498) million. Somehow, despite that slowdown, Snap still managed to grow its daily active user count by around 19%. Snap, in its letter to investors, admitted it continues to “face significant headwinds,” but claims it sees a way out by continuing to grow and engage its core community of users.
“Historically, we have found that advertising revenues follow engagement, so while we are facing near-term headwinds to our revenue growth, we remain optimistic about our long-term opportunity based on the growth of our community and engagement,” Snap said in the letter.
The earnings report comes two months after Snap moved to lay off more than 1,000 of its employees, or around 20% of its workforce. Prior to that, the company shocked investors when it posted its weakest ever quarterly sales growth in its six years as a public company.
“We are not satisfied with the results we are delivering, regardless of the current headwinds,” Snap wrote in a letter to investors at the time.
And while Snap tried to blame its recent struggles on inflation and geopolitical tensions, declines in digital advertising revenues potentially present a more existential problem for the company and others like them who rely on ad-revenues to fund their businesses. Meta, for example, once seen as a poster child for never ending growth, lost $US250 ($347) billion worth of value in a single day earlier this year following poor advertising growth numbers. More broadly, Media investment firm GroupM, meanwhile, predicts ad revenue growth industry-wide of just 8.4% for 2022, down significantly from 24.3% growth last year.
Snap’s poor Q3 performance sent shockwaves through the ad-reliant social media industry. Meta, Alphabet, and Pinterest, all of which rely on digital advertising to make money, each saw their stock prices dip on Thursday following the news. Reuters estimates stock sell off occurring during that time may have wiped out around $US4 ($6) billion from those social media companies.