Friday October 22, 2021
Within a few minutes
Snap stock is losing a quarter of its value
The photo app Snapchat business, which is dominated by advertising revenue, has stricter data protection rules for Apple devices. For this reason, the makers are severely punished on the stock market. Founder Spiegel still believes the approach is the right one.
The advertising business of the popular Snapchat photo app has been hit hard by Apple’s privacy policy on the iPhone. Advertisers have a harder time measuring the success of their advertising campaigns, complained the operating company Snap after failed sales forecasts in the past quarter. Investors then began to flee the share: Snap lost a quarter of its value within minutes in after-hours US trading on Thursday.
In the summer, Apple introduced the rule that app developers must explicitly ask users for permission if they want to track their behavior across different applications and services for advertising purposes. According to surveys, most users reject this, which causes some previous advertising models to falter. In recent years Snap has relied heavily on small ads that are supposed to encourage users to click immediately – for example, advertising for apps that can be installed straight away.
But after the introduction of the new iPhone rules, developers could no longer recognize, for example, whether a user already has their app, said Snap manager Jeremi Gorman. Nor could they measure how quickly users reacted to the ads and how long they viewed them. Alternative software tools provided by Apple have proven to be unreliable, criticized Gorman.
“Consequences for our advertising partners underestimated”
Snap’s advertising business is also being gripped by a second aspect: Various companies are creating bottlenecks in supply chains and on the labor market. “In many cases, companies don’t have enough inventory or capacity to meet increased demand,” said Gorman. Accordingly, they have little interest in advertising their products during the usually buzzing Christmas business.
Both factors would impact the current quarter, Snap warned. In the past quarter, Snap increased sales by 57 percent year-on-year to around $ 1.067 billion (920 million euros). On the market, however, more than 1.1 billion dollars were expected. The company missed the lower end of its own forecast of $ 1.07 billion by just three million dollars, as Snap boss Evan Spiegel emphasized.
None of this helped: even according to management’s explanations, the share was still more than 21 percent in the red. Spiegel nevertheless affirmed that Apple’s measures are the right way from Snap’s point of view. “In the long run, these changes are really important to ecosystem health.” Snap’s tools to measure the effectiveness of ad campaigns are “blinded,” he said. “We definitely underestimated the consequences for our advertising partners,” admitted Spiegel.
Small businesses suffer from the limitations
Meanwhile, the number of daily active users on Snapchat rose within three months from 293 to 306 million. Bottom line, Snap posted a loss of nearly $ 72 million in the third quarter – a significant improvement compared to the loss of around $ 200 million a year earlier. Investors assumed that Apple’s data protection measures will also hit competitors like Facebook and Twitter and dropped their shares by more than four percent.
Facebook has been criticizing the changes for a long time and has already had to admit that it provided its advertisers with incorrect data. The online network points out that small and medium-sized companies in particular would suffer from the restrictions. Apple always emphasized the criticism that the protection of privacy is a human right.