Snap Inc. saw revenue growth again in the third quarter, after two consecutive periods of decline. This shows that the improvements made to its digital advertising are finally paying off. The company warned that delays in advertising caused by the conflict in Israel and Gaza could stifle the current progress.
Snap announced Tuesday that sales increased by 5.4%, to $1.19billion for the period ending Sept. 30. According to data compiled, analysts projected an average revenue decline of 2.5%.
Snap spent most of this year working on revamping the advertising business within the Snapchat app to try and reverse the slowdown in sales. The company’s strategy announced last year is to focus on investments and projects which can boost revenue.
Evan Spiegel, Chief Executive Officer of Facebook, said: “We have improved our go-to market efforts to better serve partners and drive customer satisfaction.”
Snap has been overhauling its business for more than a full year. Snapchat+, a subscription service that is unique in the social media world, has seen early success. More than 5 million users have already paid $3.99 to get early access to features in-app. More than 200 million users have sent more than 20 billion messages to the My AI chatbot. This can be used to drive engagement within the app.
Not all diversifications have been successful. Last quarter, shut down a new division that focused on augmented reality for businesses. Snap had hoped to allow retailers to adapt Snap’s AR for their websites. However, the company realized that it was not worth the complexity and cost.
According to the company, a “large” number of brand-focused campaigns have slowed down in the third-quarter after the Israel-Hamas conflict began. This delay is expected to continue into the fourth-quarter. Snap stated that it would not be prudent to give a formal forecast for the current quarter. However, its internal projections show revenue growth between $1,32 billion and $1,38 billion. This would represent a 2%-6% increase. This compares to the average estimate of $1.3 billion.
Investors will be looking to Tuesday’s results of Snap Inc. and digital advertising giant Alphabet Inc. as clues about the health of this market. Alphabet’s business in the cloud disappointed while ad revenues from its Google and YouTube divisions exceeded analysts’ expectations. This shows that marketers are willing to spend more than they expected, despite inflation and wars in Ukraine or Israel. Meta Platforms Inc. reports its results after the closing on Wednesday. The company generates 98% of revenue through digital advertising.
Shares rose by as much as 24 % in extended trading, before reversing all gains. Stock closed at $9.70 on New York’s stock exchange and has gained 8.4% in the past year.
Snap has also announced that Chief Operating Officer Jerry Hunter will retire from his position. He has held this role since 2022. Hunter, who was formerly the senior vice president for the engineering team, has been given the task of bringing together the technical and advertising side of Snap’s business to overhaul its ad service. By the end of this month, his responsibilities will be transferred to other executives. He will still remain at the company through July 1 and help with the transition.
Snapchat is used by 75% (13-34-year-olds) in over 25 countries. They use it to share videos and send disappearing messages. The company reported 406 million active daily users for the quarter. This is an increase of 12 percent from a year ago. Snap expects to see daily active users increase to between 410 and 412 million during the current quarter.
Snap’s third-quarter net loss was $368.3 millions, less than the $397.8million average estimate by analysts. The board of directors approved a stock purchase plan up to $500 million.
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