- Both Twitter and Snap reported lower-than-expected revenue in the second quarter amid a host of internal and external challenges.
- The owner of Snapchat revenue increased 13% year-on-year to $1.11 billion in Q2. The company in May disclosed it should miss its targets for the period, but the numbers still disappointed analysts. Snap posted a loss of $422 million for the quarter and declined to release future guidance.
- Twitter saw revenue decline 1% year-over-year to $1.18 billion, attributing the smell to a mix of industry headwinds and his back and forth with Elon Musk. The news suggests that worsening macro factors come up against existing advertising challenges that have weighed on the performance of social media platforms.
Overview of the dive:
Wall Street didn’t have high hopes for either Twitter or Snap due to the former’s acquisition imbroglio and the latter’s previously disclosed expectations of lost revenue. The latest results are still disappointing, heralding a series of potentially dismal tech earnings for a category that has had a tough year to date. Amazon, Alphabet and Meta Platforms announce earnings next week.
While the mood soured in the second quarter, the period was certainly not short of incidents. Twitter became a public spectacle amid a nasty spat with Musk. The Tesla founder earlier this year announced plans to acquire Twitter for $44 billion, but in July he formally tried to pull out of the deal, challenging how the platform tracks Twitter’s accounts. bots and spam. Twitter has since sued Musk to force him to complete the acquisition at the agreed price, with a trial scheduled for October. The company said uncertainty surrounding the deal affected its second-quarter revenue. He did not arrange a conference call to discuss the results. Twitter’s ad intake for the quarter increased 2% year-on-year to $1.08 billion.
The other hurdles cited by Twitter and Snap likely represent big challenges for the social media industry. The war in Ukraine has clouded business while rising inflation and fears of recession have affected advertiser demand. Even verticals that have remained relatively healthy in this environment are adjusting their approach to marketing, which is often among the first departments to take cuts during a downturn.
“[In] certain industries where revenue growth may remain strong but businesses are experiencing pressure on input costs due to inflation, we have seen reduced marketing spend and lower bids per auction,” said said Snap CFO Derek Anderson. said in a call discussing the results with analysts.
The pullback has also heightened competitive sentiment as marketers spend less in fewer places.
“[Competition]whether it’s with TikTok or any of the other very large and sophisticated players in this space, has only intensified,” Anderson said in response to an analyst question.
Even before the economy started to impact media spending, mobile ad platforms were grappling with policy changes implemented by Apple last year that make it harder to track users. The privacy-conscious tweaks, part of the iPhone maker’s app tracking transparency framework, had a noticeable effect on revenue that could now worsen as demand cools.
Snap will invest more in three areas to kick-start growth: its products and platforms, direct advertising, and finding new revenue streams. Spotlight, a feature similar to TikTok, saw total time spent on its content increase 59% year-over-year in the second quarter, according to the press release. Snapchat also recently launched a web version and paid subscription plan called Snapchat+. The way forward for Twitter is less clear pending a decision on the Musk case.