Snapchat continues to gain users and lose money, according to quarterly results released Tuesday, which bode ill for industry giants like Meta (Facebook, Instagram).
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The social network, which has long embraced augmented reality, now has 375 million daily users, up 17% from the end of 2021.
But sales stagnated at $1.3 billion for the fourth quarter of 2022.
For the full year, net losses tripled to $1.43 billion.
Chief Executive Evan Spiegel, in particular, warned in the results press release that his group continues to face “significant headwinds” on the growth side.
On Wall Street, parent company Snap was down about 14% in e-commerce after the close.
Those results “are a harbinger” for the industry, replied Insider Intelligence’s Jasmine Enberg. “They show that the social media advertising market is in a worrying state.”
In late August, Snap announced it would be laying off about 20% of its workforce, or more than 1,200 employees.
Since then, most big tech companies have had social plans. Ten days ago, Alphabet, Google’s parent company, thanked around 12,000 people worldwide, or just over 6% of their total workforce.
The major platforms are suffering from advertiser budget cuts in the face of inflation and Apple’s regulatory changes that limit publishers’ freedom to collect personal data for advertising purposes.
“Investors must (…) brace themselves for much more modest growth in this sector,” added the analyst.
Snapchat’s case is special because the app built its success with younger generations on the impact of augmented reality, but advertisers “don’t understand” the technology, she points out.
When budgets are constrained by poor economic conditions, brands tend to scale back spending they consider “experimental.”
But the platforms perceived as safe bets – Google, Facebook, Instagram – are no longer immune.
Alphabet last summer posted its weakest revenue growth since 2013, barring the onset of the Covid-19 pandemic.
And Meta saw its quarterly profit halve to $4.4 billion.
Silicon Valley’s two neighbors will release their fourth-quarter results on Wednesday and Thursday.