The Snapchat owner plans to slow recruiting “significantly” after Thursday’s dismal results sent the tech company’s share price tumbling 25%, as it faces challenges on multiple fronts.
Snap said its loss in the last quarter nearly tripled to $422 million despite rising 13% in revenue under “tougher” than expected conditions.
A hit with young internet users in its early days, short-lived messaging app Snapchat has remained a small player in the social media space as competition has intensified.
“We are not satisfied with the results we are achieving, regardless of the current headwinds,” California-based Snap said in a letter to investors.
The company pointed to a punishing confluence of increased competition, slowing revenue growth, “subverted” advertising industry standards and macroeconomic issues.
Snap’s stock price was around $12 in after-hours trading following the earnings report.
“The competition — whether it’s with TikTok or any of the other very big, sophisticated players in the space — has only intensified,” Snap chief financial officer Derek Andersen said during a call for results.
“So it’s difficult to disentangle here the many factors that are impacting what is clearly a headwind-driven deceleration in our business,” he added.
The number of people using Snapchat daily rose 18% to 347 million from the same quarter a year ago, Snap reported.
Snap launched a subscription version of Snapchat last month as it seeks to generate more money from the image-centric short-lived messaging app.
Snapchat+ is priced at $4 per month and will provide access to exclusive features. He said these would include priority technical support and early access to experimental features.
The subscription version of the service debuted in Australia, Britain, Canada, France, Germany, New Zealand, Saudi Arabia, the United Arab Emirates and the United States, Snap said.
In February, Snap reported its first quarterly profit, but two months later warned that it considered the economic outlook to have darkened significantly.
“It’s clear that the difficult economic environment continues to put pressure on Snap’s business,” said Jasmine Enberg, principal analyst at Insider Intelligence.
“Snap is also still reeling from the impact of Apple’s privacy changes, which have had a disproportionate impact on performance advertisers, creating a hit in two for its entire ad business.”
Apple has shaken up the digital advertising landscape by tightening privacy controls in the software powering its iPhones, allowing users to limit the tracking data used to target ads.
Snap is a small player in the online advertising market, accounting for less than one percent of money spent globally, making it more susceptible to such changes and challenges than internet giants such as that Facebook parent Meta Enberg said.
“It can be difficult to attribute the deceleration to just one factor,” Andersen said. “But to keep growing, we have to stay focused on the inputs we control.”
A while back, Snap rebranded itself as a “camera company,” offering deals like shooting glasses called Spectacles.
“Long term, the most exciting opportunity is (augmented reality) and we’re investing heavily in the future of AR,” Andersen said.
Meanwhile, the battle for people’s attention online is growing increasingly fierce as established titans such as Meta and Google adapt their offerings to changing trends and newcomers such as TikTok attract attention.
Anderson added that Snap intends to effectively suspend hiring and consider reining in other expenses, joining a growing number of tech companies cutting costs.
“We intend to significantly slow our hiring rate in order to effectively suspend the growth of our workforce, which represents a significant portion of our office,” he added.
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