Tech giants see stocks tumble after Snap misses second-quarter revenue

Snap missed second-quarter profits, posting $1.11 billion in revenue for the quarter ended June 30. Although this was a 13% increase over the previous year, the company missed its previous guidance by 20% to 25%. Its net loss was $422 million, down from $152 million a year earlier.

“While the continued growth of our community increases long-term opportunities for our business, our financial results for the second quarter do not reflect the scale of our ambition. We are not satisfied with the results we are achieving, regardless of current headwinds,” the company said in its letter to investors.

Snap added that platform policy changes have upended more than a decade of ad industry standards, and macroeconomic challenges have disrupted many industry segments that have been most critical to demand. growing number of advertising solutions from Snap.

“We are also seeing increasing competition for advertising dollars which are now growing more slowly. Our revenue growth has slowed significantly and we are evolving our business and strategy to adapt,” Snap explained. As it strives to re-accelerate growth and take shares, Snap thinks it will likely be some time before it sees meaningful improvements.

Snap explained that the combination of macroeconomic headwinds, platform policy changes and increased competition has limited the growth of campaign budgets. In some cases, advertisers have reduced their bids per action to reflect their current willingness to pay. For example, in some industries where revenue growth remains strong, but businesses are under pressure on input costs due to inflation, Snap has seen reduced marketing spend and lower bids. per share.

Despite this, Snap still sees significant leeway to drive growth through its direct-response advertising platform. It will focus on three key priorities: improving its privacy-preserving proprietary measurement tools, ensuring its advertising performance is well represented in advertisers’ preferred third-party measurement solutions, and continuing its investments in ranking and personalization.

The company’s dismal results also led companies involved in advertising, including Meta and Alphabet, to lose an estimated US$80 billion in combined market value, Reuters reported. Shares of Snap also fell 26%, taking its loss this year to more than 70% and also led the company to lose $7 billion in market capitalization, Reuters added.

Meanwhile, Meta shares fell 5% in extended trade while Alphabet, Twitter, Pinterest fell 3%, 2% and 7% respectively, Reuters said. According to Reuters, the decline in shares caused Alphabet to lose more than $40 billion in market capitalization while Meta lost $25 billion. Falling shares of Snap’s Shopify and Roblox were also hurt by Snap, with its shares dropping 3% each after hours, Reuters said.

Meanwhile, Snapchat reported a 54 million year-over-year (18%) increase in daily active users to 347 million. Daily active users also increased sequentially and year-over-year in North America, Europe and the rest of the world.

The company has also been successful in growing its content offerings, with total time spent watching Spotlight content increasing 59% year over year. The daily average number of Snapchatters aged 25+ interacting with publishers’ shows and content has increased by more than 40% year-over-year. It also renewed its partnerships with the NBA, WNBA, and NFL with content deals spanning Discovery Shows, Spotlight Challenges, AR Experiences, and Cameos.

At the same time, it has also expanded its offering for advertisers by rolling out features such as new AR image processing technology for businesses, which turns existing 2D product photography into AR-ready assets for trial lenses, further simplifying the workflow of AR lenses. . Other new advertiser features also include dynamic travel ads. According to Snap, this is the first category extension outside of e-commerce to its current Dynamic Ads offering, aimed specifically at hotels, airlines, tours and online travel agencies.

3 priorities for Snap

Moving forward, Snap is focusing on three priorities. First, it will continue to invest in its products and platforms to support the growth of its community, the company said in its letter to investors. Second, Snap will invest heavily in its direct response advertising business to deliver measurable returns on ad spend. Finally, the company will cultivate new revenue streams that will help diversify its revenue growth to build a more resilient business.

It also intends to recalibrate its investment levels to establish a path to breakeven free cash flow or better, even with reduced revenue growth rates. Snap will also continue to invest with a long-term perspective, especially in areas critical to realizing the long-term opportunity of AR. However, he is also looking closely at how to improve the productivity of his teams. This will include “a significantly reduced hiring rate and a strict reprioritization of goals and initiatives across the business.”

Meanwhile, Snap co-founders Bobby Murphy and Evan Spiegel have each entered into new long-term employment contracts with the company to assume their respective roles as CTO and CEO until at least January 1, 2027. , in exchange for 1 USD per year and not compensation in shares. In addition, the company is betting on Asia-Pacific by expanding its local team in Singapore in June. He recruited Saurabh Dangwal as Head of Global Brands, APAC; Dan Heffernan as head of global agency, APAC; Igor Lima as Head of Global Brands, Technology, APAC; Kelly Chiu as Product Marketing Manager; Kanishk Khanna as Director, Media Partnerships, APAC; and Monisha Singh as Recruitment Manager, APAC.

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