Snap to slow hiring after dismal earnings pummel stock price

Ephemeral messaging app Snapchat remained a small player in the social networking space as competition grew more intense. PHOTO: AFP

SAN FRANCISCO (AFP) - Snapchat's owner plans to "substantially" slow recruitment after bleak results on Thursday (July 21) wiped 25 per cent off the stock price of the tech firm, which is facing difficulties on several fronts.

Snap reported that its loss in the recently ended quarter nearly tripled to US$422 million (S$587 million) despite revenue increasing 13 per cent under conditions "more challenging" than expected.

A hit with young Internet users in its early days, ephemeral messaging app Snapchat has remained a small player in the social networking space as competition has grown ever more intense.

"We are not satisfied with the results we are delivering, regardless of the current headwinds," California-based Snap said in a letter to investors.

The firm pointed to a punishing confluence of increased competition, slowing growth of its revenue, "upended" advertising industry standards and macroeconomic woes.

Snap's share price was around US$12 in after-hours trading in the wake of the earnings report.

"Competition - whether it is with TikTok or any of the other very large, sophisticated players in the space - has only intensified," Snap chief financial officer Derek Andersen said on an earnings call.

"So it is hard to disentangle the numerous factors here impacting what is clearly a headwind-driven deceleration in our business," he added.

The number of people using Snapchat daily grew 18 per cent to 347 million from the same quarter a year ago, Snap reported.

Snap last month launched a subscription version of Snapchat as it looks to generate more money from the image-centric app.

Trouble on multiple fronts

Snapchat+ is priced at US$4 a month and will provide access to exclusive features. It said that these would include priority tech support and early access to experimental features.

The subscription version of the service made its debut in Australia, Britain, Canada, France, Germany, New Zealand, Saudi Arabia, the United Arab Emirates, and the United States, Snap said.

Snap in February reported its first quarterly profit, but two months later warned that it saw the economic outlook as having darkened considerably.

"It is clear that the challenging economic environment continues to put pressure on Snap's business," said Insider Intelligence principal analyst Jasmine Enberg.

"Snap is also still reeling from the impact of Apple's privacy changes, which have disproportionately impacted performance advertisers, creating a one-two punch to its entire ad business."

Apple rocked the digital advertising landscape by tightening privacy controls in the software powering its iPhones, letting users curb the tracking data used to target ads.

Snap is a small player in the online ad market, accounting for less than 1 per cent of the money spent worldwide, which makes it more susceptible to such changes and challenges than Internet giants such as Facebook parent Meta.

"It can be difficult to attribute deceleration to any one factor," Mr Andersen said. "But in order to keep growing, we have got to stay focused on the inputs that we control."

Meanwhile, the battle for people's attention online grows increasingly fierce as established titans such as Meta and Google adapt offerings to changing trends and relative newcomers such as TikTok grab the spotlight.

Mr Anderson added that Snap intends to effectively pause hiring and look at reining in other expenses, joining a growing number of technology firms throttling back costs.

"We intend to substantially slow our rate of hiring to effectively pause growth in our headcount, which is a significant portion of our office," he added.

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