Snap, maker of the messaging app Snapchat, reported its slowest quarterly growth rate ever on Tuesday and forecast a drop in sales for the current quarter, another sign of a slowdown in the tech sector.
Fourth quarter revenue was $1.3 billion, up 0.1% year-over-year. The company also posted a net loss of $288 million as expenses rose nearly 20% from a year earlier. A year ago, Snap reported its first and only quarterly profit as a public company.
Snap’s challenge appears to be growing. In a letter to investors, the company said quarter-to-date revenue was down 7% from a year earlier. It added that its internal forecast for the current quarter assumes a revenue decline of 2% to 10%, which would be its first revenue decline as a public company.
During the earnings call, Snap CEO Evan Spiegel said, “Ad demand hasn’t really improved, but it hasn’t significantly deteriorated either.” He added in a statement earlier , Snap continued to “face significant headwinds as we seek to accelerate revenue growth.”
Shares of the company tumbled more than 14% in after-hours trading on Tuesday. Shares of Snap have fallen more than 80% in the last year.
The result caps off a tough year for Snap, with little room for relief ahead. Persistent inflation and high interest rates have discouraged advertisers — the company’s main source of revenue — from spending money, while Apple’s privacy changes have made it harder for social media companies to track and target users in their mobile ads.
TikTok has also taken advertising business away from platforms like Snap. The Chinese-owned video app, which Snap calls one of its “very large and very sophisticated competitors,” has attracted brands, especially among young people, with its reach and cultural cachet.
Digital advertising has declined along with the global economy. But Snap is in a tougher position than its rivals because advertisers tend to cut budgets starting with smaller companies, rather than giants like Facebook and Instagram, said Kelsey Chickering, a principal analyst at Forrester. . In August, Snap laid off 20% of its workforce, discontinued at least six products and lost several executives.
“Marketers are nervous about their economic outlook,” Ms Chickling said. “They’re moving the budget to where it’s proven to work.”
One potential bright spot for Snap is its user growth, which rose 17% to 375 million daily active users in the fourth quarter. Even so, that was slightly below the 378 million subscribers Wall Street analysts had forecast.
On Thursday’s earnings call, Snap’s chief financial officer, Derek Andersen, said the company could still grow its ad business with features like Spotlight, its TikTok clone. But, he added, advertisers must use the features.
“Needs are what’s missing from things,” he said.
