Advertisement

Updated February 7th, 2024 at 13:09 IST

Snap stocks plunge 30% after ad revenue shortfall

Snap announced plans to lay off 10% of its staff, or 528 employees, in a move to invest more in long-term growth

Business Desk
Snapchat
Snapchat | Image:Unsplash
Advertisement

Snap stocks decline: Snap fell short of Wall Street's revenue expectations in its quarterly report on Tuesday, resulting in a 30 per cent decline in its shares. The Snapchat parent company continues to face challenges in competing for digital advertising revenue against larger rivals.

Despite frequently imitated features, Snap struggles to maintain its position against tech giants like Meta Platforms and Alphabet, which possess greater data resources for targeted advertising. Meta's advertising sales saw a notable 25 per cent surge in the December quarter, while Google's ad business grew by 11 per cent, with YouTube ad sales increasing by 16 per cent during the same period.

Advertisement

Investor scepticism persists regarding Snap's ability to leverage a robust advertising market effectively, with concerns centring more on internal issues rather than macroeconomic factors, as highlighted by Thomas Monteiro, a senior analyst at Investing.com.

During the analyst conference call, Snap CEO Evan Spiegel faced questions from LightShed Partners analyst Rich Greenfield regarding the company's competitive disadvantage compared to larger players. Spiegel reiterated his belief in significant growth opportunities for Snap's business, emphasising a shift towards serving advertisers focused on driving sales and website clicks rather than solely brand awareness.

Advertisement

However, Snap's fourth-quarter revenue of $1.36 billion missed analysts' consensus estimate of $1.38 billion, according to LSEG data. The company's full-year revenue for 2023 remained unchanged from the previous year at $4.6 billion.

Snap announced plans to lay off 10 per cent of its staff, or 528 employees, in a move to invest more in long-term growth. In a shareholder letter, the company outlined intentions to concentrate efforts on expanding Snapchat's user base, particularly in key revenue-generating markets like North America and Europe.

Advertisement

Despite stagnant user numbers in North America, Snap reported a modest growth of 4 million users in Europe compared to the previous year. Daily active users totalled 414 million in the fourth quarter, surpassing analyst estimates, with most of the growth occurring in regions outside North America and Europe, where advertising revenue is lower.

Snap anticipates daily active users to reach 420 million in the first quarter, with revenue projected between $1.1 billion and $1.14 billion, exceeding analysts' expectations. Nevertheless, shares of Snap experienced a significant after-market plunge of 33 per cent to $11.72 following the release of the results and the conference call.

Advertisement

(With Reuters inputs)

Advertisement

Published February 7th, 2024 at 13:09 IST

Your Voice. Now Direct.

Send us your views, we’ll publish them. This section is moderated.

Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Whatsapp logo