Snap warned that its revenues could drop by as much as 10 per cent in the first quarter of 2023, as the social media platform continues to be dogged by changes to Apple’s privacy policies that have upended its ability to tailor advertising to users.
Revenues at the Los Angeles-based company remained flat year on year at $1.3bn in the fourth quarter of 2022, in line with analysts’ expectations. It was the slowest pace of growth since the company went public in 2017, against the backdrop of an advertising slump and tough macroeconomic conditions.
However, in a letter to investors on Tuesday, Snap said that its internal forecasts assume revenues will decline by between 2 per cent and 10 per cent in the current quarter, as it continues to overhaul its advertising infrastructure after Apple’s iOS update. So far this quarter it said its revenues were down by about 7 per cent.
Shares in Snap, which fell by about 80 per cent last year, fell about 14 per cent in after-hours trading following the earnings release.
Introduced in mid-2021, Apple’s iPhone privacy changes require apps to get explicit permission from users to track them for advertising purposes. This has made it harder for apps to target and measure the success of their ad campaigns.
Snap said in the investor letter that it is using machine learning to deliver more relevant advertising, but that the latest improvements “may be disruptive to auction dynamics in the near term, especially given the weak demand environment”.
It added that it believed it “has a path to adjusted ebitda break-even” in the first quarter after starting a radical restructuring in the second half of last year, which included letting go of a fifth of its 6,500-strong workforce and cutting investment in initiatives such as its augmented reality glasses and video content production.
In the fourth quarter, daily active user numbers rose 17 per cent year on year to 375mn.
Net losses stood at $288mn in the fourth quarter, including a restructuring charge of $34mn, compared to net income of $23mn in the same quarter of the previous year.
Additional reporting by Patrick McGee in San Francisco