Snap Forecasts First Quarterly Revenue Decline; Shares Fall

Snap Inc. is forecasting its first ever quarterly revenue decline, citing a flurry of changes to Snapchat’s advertising products that may be disruptive to the social media app’s business.

Revenue is projected to drop 2 percent to 10 percent in the first quarter from a year earlier, the company said in a statement. That’s below the average analyst estimate for growth of 1.48 percent.

Snap shares fell 15 percent during premarket trading in New York on Wednesday. The stock has lost almost two-thirds of its value in the twelve months through Tuesday’s close.

Snap is making changes focused on its direct-response business — ads that prompt users to take an immediate action like buying a product or signing up for an email list. That’s been a key piece of the company’s money-making operation, especially in recent quarters when economic uncertainty has led marketers to cut back on spending.

So far in the current period, Snap has seen a 7 percent decline in revenue compared to last year, according to a letter to investors.

Snap, along with competitors like Meta Platforms Inc.’s Facebook and Alphabet Inc.’s Google, are also still grappling with a change to iPhone privacy policies from Apple Inc. that made it more difficult to personalise and track the success of ads on their apps. Shares for Meta and Pinterest Inc. fell after Snap’s results.

In the fourth quarter, Snap saw revenue of $1.3 billion — flat from a year earlier, in line with the average analyst estimate compiled by Bloomberg. It was the company’s first-ever reported quarter of no growth.

The company posted a net loss of $288.5 million, or 18 cents a share, including $34 million in charges from its workforce restructuring. That compared to a profit of $23 million, or one cent, a year earlier.

Snap ended the fourth quarter with 375 million daily users, for a 17 percent increase. In the first three months of the year the company estimates 382 million to 384 million people will use its platform daily.

Snap has become a bellwether for other digital advertising companies. Last year, it was the first to raise concerns about the slowdown in marketer spending online and to fire a significant number of employees — 20 percent of its workforce — to cut costs in the face of falling revenue.

The company has spent the last two quarters refocusing the organisation, cutting projects that don’t contribute to user and revenue growth.

In the first quarter, Snap expects the environment to “remain challenging as we expect the headwinds we have faced over the past year to persist.”

Investors will get additional information about the state of the digital ad market when Meta and Alphabet report earnings later this week.

By Alex Barinka

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