After missing sales targets and announcing “extremely tough” conditions, shares of the company that owns the social media network Snapchat have dropped. The company claims that marketers reduced spending as a result of supply chain problems.
In after-hours trading in New York, Snap shares fell by more than 25%. Concerns about economic headwinds also caused shares of technological behemoths to decline, including Facebook owner Meta and Google’s parent firm Alphabet.
Following the close of US markets on Thursday, Snap announced sales of $1.11 billion (£926 million) for the three months ending in June, falling short of Wall Street forecasts.
As a result of growing prices, supply chain interruptions, and labor shortages, the company reported that several of its advertisers had reduced their spending. The company also claimed that improvements to iPhone privacy, economic difficulties, and fiercer competition for advertisers have “significantly hampered” its revenue growth.
By the end of June, though, Snapchat’s daily active users had surpassed expectations and reached 347 million. As a result, it stated that it now seeks to decrease recruiting, expand its advertising business, and discover other revenue sources.
Following the results, shares of significant internet companies that also sell online advertisements, such as Meta, Alphabet, Twitter, and Pinterest, declined in after-hours trade.
Snap’s earnings beat those of more established competitors like Twitter, which is slated to announce statistics later on Friday. Alphabet is set to release its most recent update on Tuesday, followed by Meta on Wednesday.
Other social media companies like Meta, Google, and Twitter often release their earnings after Snap. As a result, they provide a window into the state of the entire industry. However, if Snap’s quarterly earnings are any indication, a problem exists.
Snapchat and Other Social Media Companies are Affected
The business model of social media companies is quite straightforward. Because they monetize by selling advertisements, the product is offered without charge. But Snapchat isn’t drawing a ton of advertisers. They certainly appear anxious, in fact.
People are not spending as much as they once did frequently, a sign that the economy is faltering. However, there are also other elements in play.
Apple implemented rules allowing users to reject targeted adverts last year. Unfortunately, that has been disastrous for businesses like Snap, which has charged advertisers eye-popping sums for the right to target their users for years.
And as traditional social media businesses lose users to the Chinese-owned site, TikTok’s extraordinary popularity is hurting them.
