Wednesday, February 14, 2024

Snap, the parent company of Snapchat, on Tuesday reported that its revenue rose 5 percent in the latest quarter after two straight quarters of declines, as the digital advertising market rebounded.

But Snap cautioned that the ad market remains unpredictable and that it has “observed pauses in spending from a large number of primarily brand-oriented advertising campaigns immediately following the onset of the war in the Middle East.”

Revenue for the third quarter was $1.19 billion, up from $1.13 billion a year ago and above Wall Street estimates of $1.11 billion. In the previous two quarters, Snap’s revenue had fallen between 4 percent and 7 percent.

The company remained unprofitable, recording a net loss of $368 million for the third quarter, which was wider than a loss of $360 million a year ago.

In a letter to investors, Evan Spiegel, Snap’s chief executive, said the company has “focused on improving our advertising platform” to generate higher returns for advertisers.

Many tech companies that rely on online advertising had seen sales slow last year amid rising inflation and economic uncertainty. The biggest companies, such as Google and Meta, which owns Facebook, WhatsApp and Instagram, began recovering earlier in the year. As a smaller social media company, Snap’s return to growth has been slower.

That led Snap to cut costs. The company recently closed down an augmented reality offering and announced 170 layoffs. Last year, it said it would cut 20 percent of its employees and discontinue at least six products.

Snap “is still a much smaller player than Meta and Google,” said Jasmine Enberg, a principal analyst at Insider Intelligence. “Its ad platform is not quite as advanced and it is playing catch-up to some of its peers in terms of rebuilding that platform.”

Mr. Spiegel has pledged to change Snap’s trajectory. In a memo to employees last month, Mr. Spiegel said he wanted his company to reach the “stretch goal” of 20 percent advertising revenue growth in 2024. The memo was earlier reported by The Verge and confirmed by Snap.

Snap has nonetheless increased its number of users. Daily active users for the third quarter was 406 million, up 12 percent from a year ago. Last month, Snap said it had reached five million users for its paid subscription services, up from four million in June.

For the current quarter, the company projected that it would reach 410 million to 412 million daily active users and that it was internally forecasting revenue growth of 2 percent to 6 percent.

Snap has had a hard time making money from its users, since it is commonly used as a messaging platform and does not run ads in those chats, analysts said. The company now includes ads in features like Stories and Spotlight, scrollable feeds of photos and videos from creators. Last month, the company also said it had forged a partnership with Microsoft to include ads, which come in the form of sponsored links, in its A.I. chatbot, My AI.

Snap also said on Tuesday that Jerry Hunter, the chief operating officer, plans to retire next year. Mr. Hunter, who helped build engineering and the company’s business, will support Snap through July. No replacement was named.

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