Snap Inc. shares tumbled about 15 per cent in premarket trading after the company projected its first ever quarterly revenue decline, casting a shadow over other advertising-dependent companies.
The Snapchat parent said sales are expected to drop as much as 10 per cent in the current period from a year earlier amid a flurry of changes to its advertising products. In the fourth quarter, sales were flat at US$1.3 billion, marking the first-ever quarter of no growth since the company went public six years ago.
Snap is making changes focused on its direct-response business — ads that prompt users to take an immediate action like buying a product or signing up for an email list. That’s been a key piece of the company’s money-making operation, especially in recent quarters when economic uncertainty has led marketers to cut back on spending.
The company posted a net loss of US$288.5 million, or 18 cents a share, including US$34 million in charges from its workforce restructuring. That compared to a profit of US$23 million, or one cent, a year earlier. Snap has become a bellwether for other digital advertising companies. Last year, it was the first to raise concerns about the slowdown in marketer spending online and to fire a significant number of employees — 20 per cent of its workforce — to cut costs in the face of falling revenue.
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