Snap falls 3% on uncertain advertising growth outlook amid Apple's new privacy rules
- Snap shares slipped nearly 8% in premarket trading on Friday amidst an uncertain advertising outlook for the first quarter of 2021.
- The social media company expects its first-quarter EBITDA to see a loss between $50 million to $70 million.
- Still, Snap executives say they are ready to adjust to Apple’s privacy change set to roll out this Spring.
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Snap shares fell as much as 3% on Friday after the social media company gave an uncertain outlook for advertising for the first quarter of 2021.
The Santa Monica, California-based company said it expects its first-quarter EBITDA to see a loss between $50 million to $70 million during its earnings call on Thursday.
Snap highlighted two key factors that may curtail its growth: The two-week slowdown in advertising demand brought about by the insurrection at Capitol Hill and the privacy update of Apple in iOS14 which is expected to kick in later this quarter.
“Thus we started the quarter slower than we would have otherwise expected,” company Chief Financial Officer Derek Andersen said.
The executive noted that the changes might have an impact on how Snap and other social media companies direct advertising to their users. The main change from the Apple iOS14 update will force app makers to seek permission from iPhone users to access personal information. Pundits have said many users are expected to decline, making advertising less effective.
Social media giant Facebook in December published a newspaper advertisement accompanied by a blog post slamming the update. Facebook said the move “threatens the personalized ads that millions of small businesses rely on to find and reach customers.” Facebook and Apple have sparred before over which company exploits data more.
Still, Snap Chief Business Officer Jeremi Gorman said the company will do its best to adjust to these unpredictabilities.
“Overall, we feel really well prepared for these changes, but changes to this ecosystem are usually disruptive and the outcome is uncertain,” Gorman, during the earnings call, said.
For the fourth quarter, Snap beat analysts’ estimates for both user growth and revenue as the coronavirus pandemic prompted more people to use the app to connect with friends.
Daily active users rose 22% to 265 million in the fourth quarter year-on-year, a metric watched by investors and advertisers, while revenue grew 62% to $911 million, beating Wall Street’s estimate of $857.4 million.
Snap, the owner of popular photo-messaging app Snapchat, made its biggest gains in regions outside North America and Europe, with 55% growth in daily active users.
Big Tech earnings overall were strong this quarter, driven by an increase in usage as more people try to stay connected amidst the pandemic and a strong holiday shopping season.
“The pandemic and stay-at-home orders accelerated a digital transformation, creating a new normal where brands are trying to determine the technology and trends that are here to stay,” Gorman said.
Shares of Snap Inc. were trading at $57.59 as of 10:05PM E.T. on Friday.
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