Snap, the parent company of Snapchat, experienced a second consecutive decline in quarterly sales, highlighting its ongoing struggle to attract more advertising. The social media giant’s revenue for the second quarter stood at $1.07 billion, a 4 percent decrease compared to the previous year. This follows a 7 percent revenue drop in April, marking the company’s first sales decline since its IPO in 2017. Despite narrowing its net loss to $377 million, Snap’s shares plummeted by over 18 percent during after-hours trading.
During an earnings call, Evan Spiegel, Snap’s CEO, admitted that they are “far from achieving the revenue growth to which we aspire.” The company has grappled with a broader industry ad slump resulting from an economic downturn. To address these challenges, Snap has implemented layoffs, rearranged business priorities, and restructured its executive team. However, the social media company, with a smaller audience compared to its larger rivals, has struggled in attracting advertisers. Fierce competition from platforms like TikTok, which has experienced rapid user growth and surpassed Snap in size, has intensified the situation.
Snap acknowledged making changes to its advertising platform this year to enhance user engagement with ads. However, some significant advertisers experienced disruptions as a result. Despite this setback, Snap remains optimistic that these adjustments will yield “sustained revenue growth over time.” The company has also ventured into alternative revenue streams, such as a revenue-sharing program for creators and sponsored links in the AI-powered chatbot, My AI. Additionally, Snap introduced a subscription service called Snapchat+ last year, which has attracted over four million users.
Despite these efforts, Snap’s challenges persist. Jasmine Enberg, an analyst at Insider Intelligence, believes these new initiatives are insufficient to significantly impact the company’s performance in the short term, stating, “I don’t expect the ads business to start to turn around until the economy does.”
Looking ahead, Snap projects its revenue for the current quarter to range between $1.07 billion and $1.13 billion, meeting Wall Street’s estimates. One positive aspect for the company is its increasing user base. With 397 million daily active users in the second quarter, a 14 percent year-on-year growth, most of the growth came from outside the United States.
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