The news: Snap reported lower-than-expected revenues for Q1, hurt by softer ad spending. Key figures include:
The company's shares fell up to 20% in after-hours trading on Thursday due to these disappointing results, only to rebound somewhat but remain down.
Looking ahead: Snap didn't provide official guidance but mentioned in its shareholder letter that its internal forecast for Q2 revenue is $1.04 billion, a 6% year-over-year decline. Analysts had Q2 sales projections of $1.10 billion.
Analyst insight: “Snapchat isn’t a textbook ad-supported platform: Snapchat users primarily use the app for messaging, and messaging apps are notoriously difficult to monetize,” said principal analyst Jasmine Enberg. “Snap’s strong association with augmented reality, Apple’s privacy changes, and Snapchat’s small size relative to the social platforms that advertisers bucket the app with have created additional headwinds to its ad business.”
Our take: Social media companies have been hit hard as advertisers consolidate spending in a cautious environment. That’s had an effect on smaller players like Snap. Last year, Snapchat accounted for 3.2% of all social network ad revenues, per our forecast; by 2025, that will have dropped to 2.9%.