The title Snap slumps more than 25% in afterhours trading after the social media company reported lower-than-analysts’ revenues for the third quarter. Highlighting the critical moment that the online advertising sector is going through. Snap posted earnings per share of 0,08 dollars and therefore higher than the expectations of Refiniv. While third-quarter revenues did not match Refinitiv’s analysts’ estimates 1.14 billion dollarsattesting to 1.13 billion dollars.
“Revenue growth continued to decelerate in the third quarter and continues to be impacted by a number of factors we’ve seen over the past year, including platform policy changes, macro headwinds and increased competition,” Snap said in the statement. letter to investors. “We are discovering that the our advertising partners in many industries are reducing their marketing budgets, especially in the face of headwinds of the operating environment, pressures on costs due to inflation and increase in capital costs “.
The social media company claimed that it would not have provided any guidance for the fourth quarterthe second consecutive time in which it has chosen not to offer forward guidance to the market.
In August, Snap announced it would lay off 20 percent of the company’s approximately 6,000 employees as part of a major restructuring plan. The severance indemnity and the related costs constituted an important part of the restructuring charge for the period.
Here are Snap’s third quarter numbers
The third quarter revenue of the social platform grew by 6% compared to the previous year, thus recording the lowest growth since the company’s stock market debut in 2017. Meanwhile, although it posted a surprise adjusted profit, the net loss of Snap increased by 400% to 360 million dollars, partly due to a $ 155 million restructuring charge.
The daily active users (SAD) increased by 19% year on year, showing that the company is still able to attract people to its platform, despite the difficulties on the business side. The average revenue per user (ARPU) are decreased by 11% to 3.11 dollars.
“Forward earnings guidance remains incredibly challenging, and this is compounded by the fact that fourth quarter revenue is generally generated disproportionately in the back half of the quarter, which further reduces our visibility,” the company said.
Snap added that revenue growth is likely to continue to slow in the fourth quarter, as that period “has historically been more dependent on brand-oriented ad revenue,” which has declined significantly over the last period.
Apple’s privacy policy weighs on online advertising
Apple’s 2021 iOS privacy update remains an obstacle to Snap’s ability to track users across the web, thereby weakening its online advertising activity. Rival social media companies, most notably Facebook, have suffered major losses in terms of profits precisely because of Apple’s privacy policy. The parent company of Facebook, Meta Platforms will release Q3 accounts next week, giving more insight into the weight of Apple’s iOS upgrade on the social media giants’ accounts.
Snap has lost 70% on the stock market since the beginning of the year
Snap have lost more than three-quarters of their value this year and the stock has fallen more than 30% since July following second-quarter accounts that missed both revenue and profit estimates. Snap’s board has authorized a share buyback program up to 500 million dollars. As of September 30, the company had $ 4.4 billion in cash, cash equivalents and various securities.
In addition, during the third quarter, the company said that as part of its plan to cut costs, it would shut down several expensive projects, including its drone Pixy, which he calculated to sell for $ 230. The social media company has also stopped producing the premium shows Snap Originals.