UPDATED with exec comments from call: Snap executives on delved into two troublesome areas — to do with Apple on one hand and with supply chain logjams and labor shortages on the other that make its bread and butter advertising revenue hard to predict through year end. Jitters at the quarterly numbers released after market close today smashed the shares lower in late trading.
CEO Evan Spiegel said the issues around supply chains and labor in the news every day are hitting Snapchat advertisers, constraining their spending. A new iOS privacy feature Apple rolled out this summer requiring double authentication by mobile app users in order to direct ads to them has slowed down business. A program that Apple developed to help fix the problem doesn’t work, he said. The challenges fast-growing Snapchat is seeing are “transitory,” he said. “We believe the fundamentals of our business are intact.”
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The new privacy tool, called App Tracking Transparency, gives people more control over how their mobile phone app data is used by companies like Snap (as well as Facebook and Google) to target ads these platforms rely on for sales. A pop-up now requires consumers to actively allow an app to track them or not across different sites and other apps. So its advertisers to connect the dots to better understand users and target ads.
But Spiegel took the long view, noting that “protecting privacy for users of iOS is really important for the health of the ecosystem and is something we really support.”
PREVIOUSLY: Shares of Snap plunged 30% in after-hours trading after the company reported what appeared to be solid third quarter numbers, albeit softer than hoped for revenue forecasts.
Snapchat daily users hit 306 million, an increase of 57 million, or 23%, year-over-year. Grow is slowing as expected after a bonanza that continued through last quarter driven in part by the global pandemic.
Revenue jumped 57% to $1.067 million. Net losses narrowed to $72 million. The company cited headwinds, including changes in Apple’s privacy policies. Execs will discuss the company’s numbers and outlook during a call at 5 pm ET.
Snap is the first of of the big social media platforms to report quarterly figures and is seen a bellwether for the industry. Facebook, Twitter and Google parent Alphabet report next week. Facebook and Twitter shares both dropped more than 6% in late trading after Snap’s latest numbers.
The LA-based company is massive among Gen Z (13-24 years), bigger than Facebook, Instagram and Twitter in the demo.
“Snap celebrated its 10th anniversary this quarter, and we are excited about the long-term opportunity and potential for our business, as we grew our community to 306 million daily active users, and grew our revenue 57% year-over-year to reach $1.067 billion for the quarter,” said Evan Spiegel, CEO.
“We’re now operating at the scale necessary to navigate significant headwinds, including changes to the iOS platform that impact the way advertising is targeted, measured, and optimized, as well as global supply chain issues and labor shortages impacting our partners. We will continue to focus on delivering strong results for our advertising partners and innovating to expand the capabilities of our platform and better serve our community.”