Technology

Stock market: Snap falls 25% after close due to disappointing results

At the end of June, Snapchat had 347 million daily active users, up 18% from a year ago. (Photo: 123RF)

San Francisco – Snap (SNAP, $12.04, -26.36%), the parent company of the Snapchat app, lost more than 25% in electronic trading after Thursday’s close on disappointing quarterly results.

The popular teen platform attracted users and its revenue surged in the second quarter, but the company said it was “dissatisfied” with its performance in a note to investors.

As of the end of June, Snapchat had 347 million daily active users, up 18% from a year ago, according to a press release from the California group.

He also elaborates that he continues to attract more people in all regions of the world, including in North America and Europe, where some entertainment platforms are still experiencing the beginning of saturation.

Snap is also doing well in terms of revenue, with $1.1 billion in turnover (up 13% YoY). But his net loss increased to $422 million from $152 million last year.

“The strong growth of our community enhances our long-term opportunities, but our second-quarter financial results do not reflect the scale of our ambitions,” executives said.

“We are not satisfied with our performance, whatever the difficulties associated with the current economic situation,” they added, referring, in particular, to galloping inflation.

“There are many brands among Snapchat advertisers, and it’s brand ads, especially experimental augmented reality formats, that go first when marketing budgets are cut,” notes eMarketer’s Jasmine Enberg.

Business model in question

The group, which has never posted annual net income, already issued a profit warning in May, sending its share price down.

Snapchat is also suffering from changes to Apple’s rules that require app publishers to obtain users’ consent before tracking them in their navigation to collect data for ad targeting purposes.

At the end of June, the company launched a paid version of the Snapchat+ app to diversify its sources of income.

For $4 a month, Snapchat+ users get access to more features, but the ads don’t disappear from their screens.

Subscribers will have more options to personalize their profile, such as highlighting their favorite friends. They will also have more information about the number of contacts interested in their Stories, an ephemeral format created by Snapchat and since copied by its competitors.

“Our economic model is still primarily based on advertising revenue, but we see subscription as a potentially interesting model,” the group explained in a press release.

Most of the major social networks have begun to diversify their sources of income after years of reliance primarily on very large scale targeted advertising based on the collection of personal data.

This model is being challenged by regulators interested in better protecting user privacy.

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