Snapchat’s advertising business ran into troubles on multiple fronts, and second-quarter revenue grew only 13%, to $1.1 billion. As Snap Inc. CEO Evan Spiegel said in a note to shareholders, “our financial results for Q2 do not reflect our ambition."
The company’s shares, which were already down significantly so far this year, plunged 26% to $12.03 in after-hours trading.
Snap, the camera app company that has pioneered digital video and augmented reality, has been having difficulty sustaining growth in its ads business, because of several trends that have hampered mobile marketing. In particular, last year, Apple changed its iPhone software so that apps like Snapchat could no longer track customers without their opted-in consent. The app-tracking transparency rules have done a number on apps such as Snapchat, which rely on accurate insights into how customers interact with ads to report back to brands. Without easy access to those insights, marketers are trying new platforms and tactics.
In its quarterly investor newsletter, Snap identified Apple’s platform changes as just one of the reasons for its slowed growth. Snap also noted that the general economic environment is not conducive to advertising, as there has been inflation and other challenges.
“Demand growth on our advertising platform has slowed significantly,” Snap’s investor letter said. “The combination of macroeconomic headwinds, platform policy changes, and increased competition have limited the growth of campaign budgets. In some cases, advertisers have lowered their bids per action to reflect their current willingness to pay.”
“We are not satisfied with the results we are delivering, regardless of the current headwinds,” the shareholder letter said.
In a call with Wall Street analysts on Thursday, Jeremi Gorman, Snap’s chief business officer, said that “we know that our advertising partners are facing significant uncertainty.”
Snap executives on the call discussed how marketers are dialing back on digital marketing budgets, especially on automated ad platforms like Snapchat, where it’s easy to turn campaigns on and off as economic conditions change.