Snapchat's stock fell nearly 25% in after-hours trading Thursday after the tech giant acknowledged that its ad business "was disrupted" by changes to Apple's privacy terms that rolled out in June and July.
Why it matters: Snapchat's quarterly results sent stocks for Google and Facebook down in after-hours trading on fears that their businesses may also be affected by Apple's changes.
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Facebook last month said that Apple's new app tracking transparency feature will continue to cause headwinds for its ads business in the third quarter.
"Broadly speaking, these changes have upended many of the industry norms and advertiser behaviors that were built on IDFA (Apple's unique device identifier for advertising) over the past decade," Snapchat said in prepared remarks.
Details: Snapchat said that while it anticipated some degree of business disruption, "the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our ad partners to measure and manage their ad campaigns for iOS."
The company also said that supply chain challenges caused by the pandemic also hurt its ads business last quarter, "with our ad partners facing a variety of supply chain interruptions and labor shortages."
Apple's changes also had an impact on Snapchat's top line. The company missed Wall Street expectations on revenue, which also likely weighed on Snapchat's stock price.
By the numbers, per CNBC:
Adjusted earnings per share: 17 cents vs. 8 cents forecast by Refinitiv
Revenue: $1.07 billion vs. $1.10 billion forecast by Refinitiv
Global daily active users (DAUs): 306 million vs. 301.8 million predicted by StreetAccount
Average revenue per user (ARPU): $3.49 vs. $3.67 predicted by StreetAccount
Yes, but: Snapchat said its ads business continues to grow in the direction it wants.
The company's chief business officer, Jeremi Gorman, said its direct response ads business is growing faster than its brands ads business, pointing to Snapchat's continued success in attracting small and medium-sized businesses to its self-serve ad platform.
It also beat Wall Street expectations on user growth. The company now has over 300 million daily active users worldwide, an increase of 57 million year-over-year.
The company has grown its daily active user base by more than 20% for the past four consecutive quarters.
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