Snap Posts Sluggish Q3 2022 Amid Attempts to Diversify From Relying on Ads

For the first time since Snap Inc. went public in 2017, it posted quarterly year-over-year revenue growth in the single digits, as its third-quarter-2022 total of $1.13 billion was up just 6% versus the third quarter of 2021. The company said in its letter to investors Thursday, “Our business continued to face significant headwinds in the third quarter, and we took action to further focus our business on our three strategic priorities: Growing our community and deepening their engagement with our products; reaccelerating and diversifying our revenue growth; and investing in augmented reality. We believe that we can be successful in this new operating environment—with elevated inflation, increasing interest rates and heightened geopolitical tensions—by rigorously prioritizing our investments and continuing to delight our community with our products while driving success for our advertising partners.” Forrester principal analyst Kelsey Chickering did not quite share that rosy outlook, saying in an email to Adweek, “Facing an economic downturn, marketing teams are feeling the pressure to prove the return on investment of every single line item on their media plans, and they're going to consolidate spend to fewer, stronger channels and partners as a result. Unfortunately for Snapchat, its share of advertiser budgets will likely shrink further, as marketers shift into the most efficient and proven channels.” Snapchat tallied 363 million daily active users at the end of the period, up 19% year-over-year, and it projected a rise to roughly 375 million at the end of the fourth quarter. The company said DAU growth spanned all regions, but Insider Intelligence principal analyst Jasmine Enberg countered in an email to Adweek, "While user growth remained strong, most of that growth is coming from the rest of the world. Strong growth outside of North America won’t be enough to offset the slowness in Snap’s core market and where it generates most of its revenue." Snap said Snapchat reaches more than 75% of those aged 13 through 34 in more than 20 countries, with users created more than 5 billion Snaps with the application’s camera every day, on average, adding that total time watching user-generated-content platform Spotlight was up 55% year-over-year, with monthly active users topping 300 million during the quarter. Snapchat+ reached more than 1.5 million paying subscribers during the quarter, and the $3.99-per-month service is now available in over 170 countries. However, Chickering said, “Snapchat's diversification out of an ads-only business is necessary, but at only 1.5 million paying subscribers for Snapchat+, it is still very much ad-reliant … Not only are consumers in subscription overload, but they're also pulling back discretionary spending as economic uncertainty mounts. These headwinds will make it difficult for Snapchat to effectively grow its subscription business. Enberg added, "Snapchat is going through its most difficult period to date. Its disappointing Q3 earnings are a combination of the near-term challenges, including the weak economy, Apple’s privacy changes and increasing competition from TikTok, but they also reflect Snap’s longer-term challenge of being a less-essential player in the digital ad market—and a platform that many advertisers still struggle to fully understand."

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Snap Posts Sluggish Q3 2022 Amid Attempts to Diversify From Relying on Ads

Snapchat totaled 363 million daily active users at the end of the period, up 19% year-over-year

David Cohen

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