Why it matters: The digital advertising slump is trending back, but it’s not for everyone.
Demand declines for Google’s search ads and Facebook’s display ads have stabilized, with the digital advertising giants each reporting a slight uptick in growth this week.
But as a smaller company, Snap still faces stiff competition from the likes of TikTok. Snap is also affected by privacy changes made by Apple. This makes it difficult for advertisers to collect data and make targeted pitches.
Other companies continue to grapple with the advertising slump. Ad revenue from Google subsidiary YouTube fell 3% in his first three months of the year.
Background: Hard times.
Snap was founded in 2011 and went public in 2017. This is a growth stock and investors expect rapid expansion. As recently as his 2021, Snap reported double his revenue growth over the previous year’s results. It slowed dramatically last year and culminated in a decline this quarter amid macroeconomic uncertainty in the face of rising inflation and interest rates.
Snap’s stock fell 65% last year, and earlier this week it cut its valuation below $16 billion. That’s lower than venture capitalists valued the company before it went public in 2017.
Next Steps: Subscriptions and AI
Like many tech industries, Snap has laid off staff and cut back on creative and ambitious side projects over the last year. And like many tech industries, it’s thriving on artificial intelligence.
Snap recently launched a chatbot called My AI. This allows Snapchat users to chat with the bot individually or in groups. Bots powered by OpenAI some criticism from the user. According to Snap, users send more than 2 million messages to the bot per day.
Snap is also driving more revenue from subscriptions. Three million users pay $4 a month to access Snapchat+ and get access to additional features.
Insider Intelligence analyst Jasmine Enberg wrote in a report that the company has failed to capitalize on the excitement of its new product.
