The chat app’s earnings fall short of forecasts as advertising performance declines.
On Thursday Snap, owner of popular chat app Snapchat, reported lower revenues than expected for 3Q, and pointed to Apple’s iOS privacy updates as a primary cause. The new iOS’s App Tracking Transparency feature restricts the ability to track user behavior across apps and measure the effects of advertising.
Snap reported $ 1.07 billion in 3Q earnings, undershooting the $ 1.1 billion earnings projected by financial market data provider Refinitiv. Snap also expects to miss 4Q projections by up to $ 200 million.
CEO Evan Spiegel cited the iOS update as a main cause for lower-than-expected earnings, explaining on an earnings call that the change affected the way ads are targeted, measured and optimized.
Additionally, Spiegel indicated that supply chain issues across many industries have resulted in advertisers pulling back temporarily.
The iOS features, including App Tracking Transparency, were first announced in the spring. iOS users have the ability to opt out of app tracking. Although some change in the app advertising landscape was expected, Snap’s stock declined over 20% in this earnings news.
“We will continue to focus on delivering strong results for our advertising partners and innovating to expand the capabilities of our platform and better serve our community,” Spiegel said on the call.
Snap also reported that it had 306 million daily active users, a 23% increase year-over-year, representing 57 million more users.
Why we care. This is perhaps the biggest evidence so far of the effect that iOS updates are having on the mobile advertising business, which is a significant marketing channel. Engagement on Snap has been impressive, even in the months following peak U.S. lockdowns in the middle of 2020. Year-over-year growth in daily active users on Snap has exceeded 20% for four consecutive quarters. That means it did more than hold steady this year against all the extra digital hours people logged in last year and new apps they might have tried. Eyes will be on Facebook and the impact the iOS changes have there.
On the downside, it’s a reality that regardless of the unique experiences and convenience that social apps provide for their users, the success of the companies that build them depends on advertising revenue, and the revenue they can grow for their advertising partners.
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