Snap Crackles As Advertisers Cut Spending

Snap Inc. posted a further slowdown in sales growth and signaled the digital-ad market could remain lackluster for some time, sending its shares sharply lower in late trading, reports The Wall Street Journal.

Snap, in an investor letter Thursday, said it is operating on an assumption of no revenue growth this quarter from the year-ago period​, even though it has seen about 9% growth so far for the period​. Analysts surveyed by FactSet have been expecting almost 7% growth for the fourth quarter

The parent of the Snapchat app is among several social-media companies that have been struggling to respond to the sagging ad market and privacy policy changes Apple Inc. introduced last year that make it more difficult to target ads and track their performance. 

Snap said it generated $1.13 billion in sales in the most recent quarter, or 6% above the year-earlier figure. That was the slowest rate of growth since going public and below the 8% figure Snap said in August it was seeing. The sales figure narrowly missed Wall Street expectations, though its $360 million loss for the period was narrower than analysts surveyed by FactSet had expected.

The company, which has lost more than 85% of its value over the past year, didn’t issue detailed financial projections for the current quarter, citing market uncertainty. 

Snap kicks off the quarterly results season for digital-ad-dependent companies, which have been grappling with market disruptions for more than a year. Soaring inflation, recession fears and the war in Ukraine have weighed on digital-ad spending this year, as have the Apple privacy changes.

The industry’s biggest actors, Facebook parent Meta Platforms Inc. and Google parent Alphabet Inc., report results next week. Meta is expected to post another revenue decline, following its first-ever such retreat in the prior quarter. 

Concerns about a weakening economy have intensified in recent weeks. Amazon.com Inc. founder Jeff Bezos said in a tweet Tuesday that “the probabilities in this economy tell you to batten down the hatches.” A recent survey of economists by The Wall Street Journal also found that they expect the U.S. to enter a recession in the coming 12 months.

“Our advertising partners across many industries are decreasing their marketing budgets,” Snap said Thursday, attributing the pullback to an effort by customers to offset other cost pressures. 

Social-media companies also are contending with fierce competition for ads, particularly from TikTok. ByteDance Ltd., TikTok’s parent, has invested heavily to boost the short-video app. The app generated nearly $62 billion in revenue last year, and more than $18 billion during the first three months of this year.