Snap knows it can get better. The company reported earnings results for the second quarter of 2022 this afternoon, and the numbers show a company that is continuing to grow its users and revenue — albeit at a much slower pace than it used to.
“Our financial results for the second quarter do not reflect the extent of our ambition,” the company wrote in a note to investors. “We are not satisfied with the results we deliver.”
The news was part of a rallying cry to investors that essentially says stay tuned, we’re working on it. To turn things around, Snap promises to “recalibrate”; its attitudes, goals, and investments. And in a splashy move, the company said it has signed Snap co-founders Evan Spiegel and Bobby Murphy, the company’s CEO and CTO, to stay on for an additional four years through the end of 2026.
“Changes in platform policies have turned advertising industry standards upside down for more than a decade.”
Spiegel and Murphy are paid $1 a year with no additional equity. However, they are spurred on by promises of a stock split if Snap’s stock price hits $40 within the next 10 years, compared to its current value of around $16. Snap says the split would allow Spiegel and Murphy to sell non-voting stock in Snap, allowing them to retain their voting stock and retain control of the company.
That rallying cry doesn’t come because Snap is falling apart. The company had revenue of $1.11 billion in the second quarter, up from $982 million in 2021, and added 15 million more users for a total of 347 million.
The problem for Snap is that it’s simultaneously grappling with a shaky economic environment and the impact of an advertising market that was turned on its head by Apple last year when the company abandoned the type of user tracking that advertisers had long relied on. drastically restricted. “Changes in platform policies have turned ad industry standards upside down for more than a decade,” Snap writes. As a result, Snap’s revenue growth has slowed and net income has fallen to a loss of $422 million from a loss of $152 million in last year’s second quarter.
Snap is now working to pick up the ad shards and find other means of boosting sales. The company is trying to improve its own ad effectiveness measurement tools and personalization options. It’s also looking for new revenue streams, like its newly launched power-user subscription service, Snapchat Plus. The service already seems to have some successes. Analytics firm Sensor Tower found that in-app spend has increased 136x in the three weeks since launch compared to the previous three weeks, growing to $6 million in purchases.
There will likely be some major glitches within Snap as it attempts to reverse its performance. The company twice warns in its letter that it will reduce hiring, adjust its targets and reassess its spending. However, two things that are out of the question are investing in AR and growing the Snapchat community.
Despite all of this, Snap warns investors not to expect immediate improvements. It gives no guidance for Q3 and says existing earnings remain flat year-on-year.
“We believe it will likely be some time before we see significant improvements,” the company writes.
Snap’s results could also hint at upcoming troubles for Meta, which reports its Q2 results next week. In recent weeks, management has warned of “grave times” and “heavy” headwinds while cutting hiring plans for the year. The company is quickly revamping both Instagram and Facebook to better compete with TikTok and retain user interest, while also addressing the same advertising issues Snap faces – only on a much larger scale.