Snap Plunges By Most in Six Months After Posting Revenue Decline

Snap Plunges By Most in Six Months After Posting Revenue Decline

(Bloomberg) -- Snap Inc. slid by the most in more than six months after reporting its first-ever decline in quarterly revenue, signaling that a broader pullback in advertising will continue to weigh on earnings.

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The maker of the Snapchat app saw revenue fall 7% to $988.6 million in the first quarter, according to a statement filed on Thursday, falling well below the $1 billion average estimate from analysts.

The “continued disruption in demand” for advertising, brought on by both broader economic pressures and Snap’s own product changes, is expected to continue into the current quarter, the social media company said in a letter to investors. Snap projected second-quarter revenue of $1.04 billion — missing the $1.1 billion average analyst estimate.

Snap has been tweaking the design of its direct response ads — promotions that prompt users to take an immediate action like clicking to buy a product or signing up for an email list. It’s a change that the company expects will boost revenue in the long term — but has so far proven disruptive.

With its core ad business under pressure, Snap cut costs and has been searching for new streams of revenue. The company now has more than 3 million paying users for its subscription offering, Snapchat+. Meanwhile, the company rolled out last quarter augmented reality technology that it’s selling to retailers to help shoppers try on clothes virtually.

“We anticipate that it will take time for some of our advertisers to fully recover and for our models to become better tuned to their new objectives,” the company said.

Snap was down as much as 19.9% in New York on Friday, the biggest intraday decline since Oct. 21. The stock has essentially erased all of its gains this year.

The company posted a net loss of $329 million, below the average $360 million analyst estimate.

Snapchat had 383 million users daily in the first quarter, in line with analyst estimates. The time people spent watching content via Snap grew, with the majority of the increase on the short video feed called Spotlight. Still, average revenue per user fell to $2.58 from $3.20 in the quarter a year earlier, impacted by less spending by marketers on digital ads.

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