Technology

Snap shares drop 25% as revenue falls short, Apple privacy bites ads business

Many of the advertisers who place ads on Snapchat are in the beauty, fashion and consumer goods industries.   | Photo Credit: Reuters

Snap Inc on Thursday fell short of Wall Street estimates for quarterly revenue as the company said privacy changes implemented by Apple Inc on iOS devices hurt the company's ability to target and measure its digital advertising, sending its shares down 25%.

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The Santa Monica, California-based company, which owns photo messaging app Snapchat, earns the vast majority of its revenue from selling digital advertising on the app.

Snap said the issue was compounded by global supply chain disruptions and labor shortages, which caused companies to pull back on their advertising spending.

Many of the advertisers who place ads on Snapchat are in the beauty, fashion and consumer goods industries.

While the Apple privacy updates, which prevent digital advertisers from tracking iPhone users without their consent, were expected to hurt third quarter results, an ad measurement tool provided by Apple "did not scale as we expected," Snap said.

Snap added that it expects the Apple privacy changes and global supply chain disruptions to linger through the fourth quarter, which is typically the highest-earning period for social media companies when brands ramp up marketing for the holiday season.

Revenue for the third quarter ended Sept. 30 was $1.07 billion, missing consensus estimates of $1.1 billion, according to IBES data from Refinitiv.

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The results for Snap, which is the first of the major social media companies to report earnings, could cast a shadow over Facebook Inc and Twitter Inc, which release third quarter results next week.

Snap shares dropped as much as 30% before cutting losses. The news also knocked Facebook shares down 6%, Twitter down 7% and Alphabet fell 3% on Thursday.

Snaps's daily active users, a metric watched closely by advertisers and investors, rose 23% year-over-year to 306 million, beating analyst estimates of 301.9 million.

Snapchat has worked to attract and retain users by building new features like the ability to discover restaurants and stores through a map feature, or play virtual games with friends.

The net loss during the quarter was $72 million, or 5 cents per share, narrowing from $199.9 million, or 14 cents per share, in the year-ago quarter.

Snap forecast fourth quarter revenue between $1.16 billion to $1.2 billion, and daily active users between 316 million to 318 million.


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Printable version | Dec 3, 2021 9:01:01 AM | https://www.thehindu.com/sci-tech/technology/snap-shares-drop-25-as-revenue-falls-short/article37120984.ece

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