The Snapchat owner plans to slow down hiring “significantly” after dismal results on Thursday wiped out 25 percent of the tech company’s share price, which has been struggling on multiple fronts.
Snap reported that its loss nearly tripled to $422 million in the recently ended quarter, despite revenue up 13 percent amid conditions that it said were “more challenging” than expected.
A hit with young internet users in its early days, ephemeral messaging app Snapchat has remained a minor player in the social networking space as competition intensified.
“We are not satisfied with the results we are delivering, notwithstanding the current headwinds,” California-based Snap said in a letter to investors.
The company pointed to a punitive combination of increased competition, slowing revenue growth, “upside-down” advertising industry standards and macroeconomic woes.
Snap’s stock price was around $12 in after-hours trading following the earnings report.
“Competition — whether it’s with TikTok or any of the other very big, sophisticated players in the industry — has only increased,” Derek Andersen, Snap’s chief financial officer, said on a conference call.
“As such, it is difficult to disentangle the multiple factors here that are contributing to a clearly headwind-driven slowdown in our business,” he added.
The number of people using Snapchat daily rose 18 percent from the year-ago quarter to 347 million, Snap reported.
Snap launched a subscription version of Snapchat last month as it appears to be making more money off the image-centric, short-lived messaging app.
– Problems on several fronts –
Snapchat+ costs $4 per month and comes with access to exclusive features. It said that these would include priority technical support and early access to experimental features.
The subscription version of the service made its debut in Australia, the UK, Canada, France, Germany, New Zealand, Saudi Arabia, the United Arab Emirates and the United States, Snap said.
Snap reported its first quarterly earnings in February, but warned two months later that the economic outlook had deteriorated significantly.
“It is clear that the challenging economic environment continues to put pressure on Snap’s business,” said Jasmine Enberg, principal analyst at Insider Intelligence.
“Snap is also still suffering from the impact of Apple’s privacy changes, which have disproportionately impacted performance advertisers and created a double whammy for its entire ad business.”
Apple rocked the digital advertising landscape by tightening privacy controls in the software that powers its iPhones and allowing users to limit the tracking data used to target ads.
Snap is a small player in the online advertising market, accounting for less than 1 percent of the world’s money spent, making it more vulnerable to such changes and challenges than internet giants like Facebook parent Meta, Eng said.
“It can be difficult to attribute delay to a single factor,” Andersen said. “But to keep growing, we need to focus on the inputs we control.”
Snap re-formed as a “camera company” some time ago, offering offerings like glasses for taking pictures called Spectacles.
“Long term, the most exciting opportunity is (augmented reality) and we’re investing heavily in the future of AR,” Andersen said.
Meanwhile, the battle for people’s attention online is heating up as established titans like Meta and Google adapt their offerings to changing trends and relative newcomers like TikTok steal the spotlight.
Anderson added that Snap plans to effectively pause hiring and rein in other spending to join a growing number of tech companies cutting costs.
“We intend to significantly slow our hiring rate to effectively halt the growth of our headcount, which makes up a significant portion of our office,” he added.
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