SANTA MONICA, California – Snap Inc. saw a significant drop in late trading after announcing disappointing revenue for the holiday quarter. The owner of the Snapchat app reported a 5% increase in fourth-quarter revenue to $1.36 billion, missing analysts’ projection of $1.38 billion. The sales growth for the full year was flat, reflecting what the company described as a challenging operating environment.
Since CEO Evan Spiegel began leading the company through a broad restructuring two years ago, Snap has been cutting jobs and ending projects that do not result in increased revenue or user growth. The company also announced plans to cut its workforce by an additional 10% this year in an effort to reduce bureaucracy and promote in-person collaboration.
Despite efforts to rely less on social media advertising, Snap is still dependent on that market, struggling to compete with bigger players like Meta Platforms Inc., the owner of Instagram and Facebook. The company was also affected by changes in 2021 to Apple Inc.’s privacy settings, making it harder for advertisers to track iPhone users.
Snap introduced new revenue streams, including its subscription offering Snapchat+, which has already amassed 7 million paying users. The company also reported that Snapchat had 414 million daily active users in the fourth quarter, up 10% from the same period last year. However, almost half of those users are in established markets like North America and Europe, prompting the company to prioritize efforts in those regions.
Snap projected revenue of $1.10 billion to $1.14 billion in the first quarter, up as much as 15% from a year earlier. The company also reported a net loss of $248.7 million in the fourth quarter, less than the average analyst estimate. However, the company will incur costs between $55 million and $75 million related to layoffs, the majority of which will be spent in the first quarter.