Snapchat, the Snapchat application’s parent company, largely disappointed the market, saying Thursday it was “not satisfied” with its quarterly results, to the point that it significantly slowed the pace of hiring, among other measures to try to regain control.
• Also read: A $4 per month plan to use Snapchat
• Also read: Paying the social network Snapchat soon?
Its stock fell more than 26% in electronic trading after the close.
Snapchat had 347 million daily active users at the end of June, up 18% from a year ago, according to a statement, and it continues to attract more people in every region of the world, including North America and Europe, where some entertainment platforms stand out nonetheless before the onset of saturation.
The Californian group is also doing well in terms of earnings with sales of 1.1 billion dollars (+13% over the year).
But net losses rose to $422 million from $152 million last year.
“The continued growth of our community enhances our long-term opportunity, but our second quarter financial results do not reflect the magnitude of our ambition,” executives said in a note to investors.
“We are not satisfied with our performance, notwithstanding the difficulties related to the current economic environment,” they added, noting in particular runaway inflation.
“Snapchat has many brands among its advertisers, and ads for brands, especially experimental formats centered around augmented reality, are the first to go as marketing budgets are cut,” noted Insider Intelligence’s Jasmine Enberg.
The group, which has never generated a profit for the year, had already issued a profit warning in May, which caused the share price to collapse.
“We will be significantly slowing the pace of hiring … and we will also be taking a close look at our operating expenses,” Derek Andersen, Snap’s chief financial officer, said in a conference call with analysts.
The company employs nearly 6,500 people, up 38% from a year ago.
The network’s co-founders, Bobby Murphy and Evan Spiegel, will remain as CTOs and CEOs through the end of 2026 for a token compensation of $1 per year plus stock awards if the price climbs above $40 over the next 10 years. At the close on Thursday, it was at $16.35.
Bosses want to focus on innovation and income diversification.
In late June, the company launched Snapchat+, a paid version of the app that offers access to additional features without removing ads for $4 per month.
Snap also wants to develop better tools for measuring advertising effectiveness.
Because the application also suffers from Apple’s regulatory change that requires application publishers to obtain user consent before tracking them in their navigation to collect data for advertising purposes.
“It’s a small player in the digital advertising market. According to our projections for 2022, it accounts for less than 1% of global revenue, making it more vulnerable to restrictions than bigger players like Meta,” stressed Jasmine Enberg.
Derek Andersen has noted a “rather steady” decline in demand over the past year that has been “intensified” with Apple’s changes and competition, “both from TikTok and other bigger competitors and more sophisticated” – like Google and Meta (Facebook , Instagram ).
So many challenges to which must be added the war in Ukraine and record inflation.
“We’re going to need a more collaborative environment,” admitted the CFO.
“It is very important to create a solid foundation for the platform on which we can build and move forward. But also a macroeconomic context that allows clients to invest in their marketing budget is very important,” he said.
The company hopes its bet on augmented reality will pay off in the long run.
“On average, more than 250 million Snapchat users use augmented reality (our tools) every day,” the note to investors said.
This technology “is still niche as an advertising or commercial tool, but it appeals to Snapchat’s user base,” notes Jasmine Enberg.
According to the analyst, as long as the platform continues to invest in tools and content, it will “attract and retain more available brain time, and ad revenue will follow.”