- Snap, the company behind the social network Snapchat, continues to face chronic problems that are difficult to solve: its situation worsened after the poor results it presented in its last fiscal quarter.
- Snap’s shares continue to fall, registering the worst share price since January 2019.
- Revenue declined 7%, and the disruption in advertising demand is expected to continue in the next three months.
The crisis of the company behind the social network Snapchat continues to worsen and analysts speak of “chronic problems that are difficult to solve.”
In this context, Snap Inc. shares plummeted on the stock market after the poor results it presented for its last fiscal quarter.
Nothing else could be expected: the numbers reflect the first year-on-year decline in revenue in the history of the company that owns Snapchat, with a share price opened the week with a significant decline, down almost 20 percent, and continued down to fall below $8. It is the worst share price since January 2019.
The stock lost nearly 90 percent of its value from the highs reached in mid-2021, when at the end of the pandemic it still appeared to be a company with significant growth prospects.
First black quarter for Snap
Snap announced that revenue in the first quarter of 2023 was $990 million (€900 million), a 7 percent drop from the first three months of 2022.
Losses, on the other hand, grew by 9 percent to $330 million. In addition, adjusted gross operating profit has volatilized, falling from $65 million in the first quarter of last year to less than $1 million in the same period of 2023.
The company warned through a quarterly statement to investors that it expects continued disruption in advertising demand, caused by economic pressures and the company’s own product changes, to continue over the next three months.
“We estimate that it will take some time for our advertisers to fully recover and for us to adapt our models to new targets,” he said.
The company had already shown signs that it was going through a bad patch. Over the past year, losses increased 100 percent from $490 million in 2021 to $1.4 billion. Turnover was flat in the last quarter of 2022, with declines in much of 2022.
Nothing is as it was
The tech company founded and led by Evan Spiegel preferred not to announce its estimates for the next quarter and highlight the growth in user volume. “Our community continues to grow, reaching 385 million users per day in the first three months of the year, and we are working to increase relationships with our content platform, while developing new features and cutting-edge services such as My AI,” Spiegel, CEO of the company, said through a statement.
“We are looking to increase revenue growth and can take this opportunity to include significant new enhancements to our advertising platform with the goal of increasing the return on investment for our key partners,” he added.
When it debuted on the stock market in 2017, the company was posting exponential growth. That increase gradually faded, but was still continuing at a positive pace at the beginning of last year.
Today, it abruptly slowed and began a decline that is difficult to predict whether it is temporary or a sign of platform exhaustion.
In the middle of last year, the company announced a 20 percent reduction in the workforce and the cancellation of several projects as part of a new corporate restructuring strategy.
Snap led the first wave of layoffs at technology companies.
Snap stock’s roller coaster ride
Snap stock has had a “roller coaster ride” in the business world. The company went from a promising startup to one that has faced numerous setbacks and challenges. And one that doesn’t see a light at the end of the (dark, by the way) tunnel.
Snapchat first emerged in 2011 as a platform for sharing photos and short videos with friends.
The app quickly gained popularity among Generation Z users thanks to its unique features, such as filters and lenses. The company’s growth was fueled by the rise of social media.
Snap Inc. went public in March 2017 with an initial public offering that valued the company at $28 billion.
However, the company’s fortunes soon took a turn for the worse. Facebook, Instagram and other social media platforms copied Snapchat’s most popular features and began capturing a larger share of the market.
Snap Inc. had trouble keeping up with these competitors and its user growth stagnated. In addition, the company faced criticism for the redesign of the app, which was heavily criticized by users.
Snap and monetization problems
The company also faced challenges in monetizing its platform. Snap Inc. had relied heavily on advertising revenue, but had complications convincing marketers to spend money on its platform.
In 2018, the company’s stock price took a hit when it announced disappointing earnings and a decline in daily active users. It was the beginning of the end.
As a way out, it tried to diversify its business by expanding into hardware, launching its Spectacles sunglasses with integrated cameras in 2016.
However, the product failed to gain traction and the company took a $40 million write-down on unsold inventory. get the picture? It manufactured hundreds of thousands of Spectacles that it never sold.
Unsuccessful diversification (for now)
The company continued to face challenges, including a series of executive departures and a drop in employee morale.
It had some successes, such as the launch of new features like Snap Map and augmented reality experiences. But it was fleeting.
Despite these efforts, Snap Inc. continued to struggle in the face of competition from larger tech companies.
In 2020, the company faced additional challenges due to the pandemic, which led to a decline in advertising revenue and user engagement.
As of 2023, Snap Inc. has lost much of its luster, and its stock price currently trades at a fraction of its IPO valuation.
The company has shifted its focus to developing its platform as a content and entertainment destination, partnering with media companies and investing in original content.
However, it remains to be seen whether this strategy will be enough to help the company regain its former prominence in the competitive world of social media.
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