Woke Snap shares plunge 30% in the wake of quarterly loss, layoffs

[Biden Economy]

Shares of Snapchat parent Snap plunged on Tuesday after the company
reported a loss in the final three months of 2023.

Snap reported a net loss of $248 million for the December quarter,
an improvement from the same period in the prior year and a narrower
loss than Wall Street analysts had expected. Still, shares fell
around 30% in after-hours trading Tuesday.

The company also said revenue from the quarter grew 5% year-over-
year to $1.36 billion, its second consecutive quarter of revenue
gains after two earlier quarters of declines last year.

However, in a Tuesday letter to investors, Snap said the conflict in
the Middle East posted a “headwind to year-over-year growth of
approximately 2 percentage points in Q4.”

CEO Evan Spiegel attempted to strike an optimistic tone in the
company’s earnings release, saying, “2023 was a pivotal year for
Snap, as we transformed our advertising business and continued to
expand our global community, reaching 414 million daily active
users.”

But the report comes one day after the company announced it would
lay off 10% of its staff, cutting around 500 jobs. The reductions
signal that the company is still in cost-cutting mode after the
company in 2022 laid off what was then 20% of its workforce, around
1,200 employees, and another 3% of its staff last year.

Snap said Monday that the layoffs were meant to “best position our
business to execute on our highest priorities” and to “promote in-
person” work.

“Based on these numbers, yesterday’s layoffs appear more than
necessary as the company will need to rethink its strategy,
particularly in terms of monetization,” Thomas Monteiro, senior
analyst at Investing.com, said in emailed commentary following the
report.

Investors may be especially disappointed by Snap’s Tuesday results
in the light of rival platform Meta’s 200% year-over-year profit
growth for the same period, reported last week, which indicated an
improvement in the larger digital advertising market, Monteiro said.

“Snap has failed to show the market its ability to capitalize on
resilient ad spending across different parts of the economy,” he
said.

Snap has been working to improve its advertising technology and
offerings, following changes Apple’s made to its app tracking
policies in 2021 that delivered a hit to the business models of
Snapchat, Facebook and other platforms.

Spiegel touted the success of Snap’s ad-targeting efforts on Snap’s
earnings call on Tuesday, saying the company had seen the number of
small and medium-sized advertisers grow 20% year-over-year.

“I do think we’re making significant progress and we’re optimistic
that we can continue to accelerate,” Spiegel said.

Snapchat in November announced a deal with Amazon that would let
Snapchat users click on Amazon ads on the app, shop and check out,
all without leaving the platform. The tool appeared to be a bid to
more readily compete with the e-commerce offerings of rivals like
Instagram and TikTok and to make Snapchat more attractive to
advertisers.

Snap on Tuesday also announced that its Snapchat+ subscription
program — a key effort to diversify its revenue — now has more than
7 million subscribers, up from the 5 million it reported in the
fall.

The company also reported strong user growth. Daily active users
grew 10% year-over-year in the December quarter to 414 million, with
gains largely coming from outside the US and Europe. However,
average revenue per user globally dipped 5% from the year-ago
quarter.

In the current quarter, Snap said it expects daily active users to
continue to grow from the December quarter to 420 million. The
company is projecting year-over-year revenue growth of between 11%
and 15% for the first three months of 2024.

Tuesday’s report also comes as Snap attempts to revamp its public
image and distance itself from social media peers like Meta and
TikTok that have faced regulatory scrutiny and safety concerns.

Snap on Friday launched a new brand campaign with the tagline “Less
Social Media. More Snapchat” that aims to highlight its focus on
private, personal conversations rather than passive consumption of
content promoted by an algorithm.

Snapchat does have a feed called Spotlight where users can scroll
through algorithmically sorted, short-form videos. But the company
says its core mission is helping people to communicate with friends.

Days before the campaign’s launch, Spiegel appeared to testify
alongside other tech leaders in a Senate hearing focused on the
platforms’ safety measures for young users. During the hearing,
Spiegel apologized to parents whose children had died after
purchasing drugs on Snapchat.

https://www.cnn.com/2024/02/06/tech/snap-shares-plunge-q4-
loss/index.html