Snap, disappointing, cuts hiring and loses 25% in the Stock Market

Snap, the parent company of the Snapchat app, largely disappointed the market with its quarterly results on Thursday, to the point of substantially slowing the pace of hiring, among other measures to try to regain control.

Its title lost more than 26% during electronic trading after the close of trading. Snapchat had 347 million daily active users at the end of June, 18% more than a year ago, and continues to attract more people in all regions of the world, including North America and Europe, where, however, some platforms entertainment face the beginning of saturation.

The Californian group is also doing well in terms of revenue, with a turnover of 1.1 billion dollars (+13% in one year). But his net loss widened to $422 million from $152 million last year.

Expense Review

The group, which has never generated an annual net profit, had already issued a profit warning in May, which had plunged its share price. “We will substantially reduce the pace of recruiting … and we will also take a hard look at our operating expenses,” Snap Chief Financial Officer Derek Andersen said on a conference call with analysts. The company has nearly 6,500 employees, 38% more than a year ago.

Network co-founders Bobby Murphy and Evan Spiegel will stay on as CTO and CEO until the end of 2026 for a nominal compensation of $1 a year, plus stock awards if the price rises above $40 in the next 10 years. It was at $16.35 at Thursday’s close.

The bosses plan to focus on innovation and revenue diversification. In late June, the company launched Snapchat+, a paid version of the app, which gives you access to additional features for $4 a month, without removing ads.

Snap also wants to develop better tools to measure the effectiveness of advertising. Because the app also suffers from Apple’s regulatory change, which requires app publishers to obtain users’ consent before tracking their browsing to collect data for advertising purposes.

“It is a small player in the digital advertising market. It accounts for less than 1% of global revenue based on our 2022 forecast, making it more sensitive to constraints than larger players like Meta,” Jasmine Ember underlined.

Augmented reality to the rescue of the sad reality

Derek Andersen has noted a “pretty steady” decline in demand over the past year, consistent with changes from Apple and competition that has “intensified,” “both from TikTok and other larger, more sophisticated competitors,” such as Google and Meta (Facebook, Instagram).

So many challenges to which must be added the war in Ukraine and record inflation. “We’re going to need a more cooperative environment,” the CFO acknowledged.

“Laying a solid foundation for the platform, on which we can build and move forward, is very important. But a macroeconomic context that allows customers to invest in their marketing budget is also very important,” a- specified.

The company hopes that its commitment to augmented reality will pay off in the long term. “On average, more than 250 million Snapchat users use augmented reality (our tools) every day,” the note to investors assures.