Snap’s ad revenue isn’t growing as fast as its peers
An ad price snafu was partly to blame.
Snap’s stock plunged after narrowly missing earnings expectations yesterday. One reason investors are disappointed: ad revenue growth was a lot slower than the company’s tech and social media peers — even those like Meta, whose ad revenue is about 40x the size.
Shares are trading down over 20% in early trading on Wednesday.
Snap ad revenue grew just 4% in the second quarter, compared with a year earlier — less than it the 9% it grew in the previous quarter. The company partly blamed an ad pricing snafu for the slowed growth.
“Unfortunately, in our efforts to improve advertiser performance, we shipped a change that caused some campaigns to clear the auction at substantially reduced prices,” the company wrote in its investor letter. “We have since reverted this change and advertising revenue growth has improved as advertisers adjust their bid strategies to achieve their objectives.”
During the earnings call, the company’s CFO, Derek Andersen, also pointed to the timing of Ramadan, “which was less of a benefit in Q2 than in the prior year,” as well as the end of the de minimis exemption.
Like pretty much every other tech company, Snap is hoping its investments in AI will help it make more money on ads, which are responsible for the lion’s share of its revenue.
Here’s CEO Evan Spiegel on the earnings call:
“Looking ahead, we see significant opportunities to further enhance return on advertising spend by deepening our investments in AI and machine learning, delivering innovative ad formats across the entire funnel, and enhancing the tools and insights that help our advertising partners optimize their campaigns. These ongoing efforts are aimed at ensuring Snapchat remains a high-performing and increasingly automated platform for all of our advertising partners.”
But so far it’s having trouble keeping up with everyone else.
