Why it matters: The digital advertising slump is bouncing back, but not for everyone.
Declines in demand for Google search ads and Facebook display ads have stabilized, with the digital ad giants each reporting slightly higher growth for the week.
But smaller company Snap still faces stiff competition from the likes of TikTok. Snap has also been hit by Apple’s privacy changes, which make it harder for advertisers to collect data and show highly targeted promotions.
Others are also continuing to grapple with the advertising downturn. Ad revenue for Google subsidiary YouTube fell 3% in the first three months of this year.
Context: Hard times.
Snap was founded in 2011 and went public in 2017. It’s a growth stock, which means investors expect it to expand quickly. Just in 2021, Snap is reporting double the revenue growth of the previous year. This trend has slowed sharply over the past year due to macroeconomic uncertainty due to rising inflation and interest rates, culminating in the quarter’s decline.
Snap’s stock price has fallen 65% in the last year, and its valuation fell below $16 billion earlier this week. That’s less than what venture capitalists valued the company before it went public in 2017.
What’s Next: Subscriptions and AI
Like much of the tech industry, Snap laid off staff and pared creative and ambitious side projects last year. Like much of the tech industry, it’s doing well with artificial intelligence.
Snap recently launched a chatbot called My AI, which allows Snapchat users to chat individually or with groups.Robots powered by OpenAI encountered some criticism from the user. Snap says its users send more than 2 million messages to the bot every day.
Snap is also pushing to generate more revenue from subscriptions. Three million users pay $4 a month for Snapchat+, which gives them extra features.
Insider Intelligence analyst Jasmine Enberg wrote in a note that the company has yet to translate the excitement surrounding its new product into revenue, which doesn’t change “the reality that its core business is struggling,” she wrote.
