It’s not Snapchat’s best day. Yesterday, the company issued a guidance note to the SEC which advised that the platform’s overall revenue would miss its target that it put down in its Q1 update, which it reported just last month.
As Snap puts it:
“Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated. As a result, we believe it is likely that we will report revenue and adjusted EBITDA below the low end of our Q2 2022 guidance range.”
Snapping Out
Given all the recent global disruptions – the Ukraine crisis, the ongoing pandemic, labor shortages in several regions – it’s not too surprising to learn that Snapchat had to endure tougher operations. However, the fact that it had to issue this guidance soo soon after announcing its targets does raise some concern. As noted by Snap, it points to a rapidly changing landscape, particularly for platforms that rely on European income and brand advertising.
The market didn’t take long to respond, with Snap shares going down by as much as 41%, wiping the company’s $15 billion market value. Snapchat wasn’t the only one impacted. Its guidance meant that the same factors likely affected the likes of Meta, Twitter, Google, and Pinterest too, all of which saw declines, chipping off billions worth value for their digital advertising providers.
We can’t say for certain what the full impacts are to current market conditions, but the assumption is that Snap isn’t alone in taking a substantial hit on advertising spend. At least on the European front, Snap, along with other social platforms who call it a central market, continues to battle rising costs amid a fluctuating economic situation. The decline has opened doors for various speculations, including what it’ll mean for Twitter and whether Snap, now lower than its 207 IPO, could now attract new suitors looking to get on the AR trend.
A potential suitor could be Meta, which seems unlikely given its antitrust allegations regarding competitive takeovers, but it might just provide Meta with a way to buy up a significant player in the AR market. Of course, Meta did try to buy out Snapchat already for $3 billion back in 2013, but was declined by Snap’s one and only CEO, Evan Spiegel. While almost a decade has passed since, Snapchat has proven that it’s a significant player in the space, with its nous for AR development and viral trends remain unmatched. That could be an attractive lure for Meta, who will soon be looking for the best angles to pitch its own AR glasses.
The Wrap
These are all based on speculation and no internal leaks or rumors suggest that this is going to happen. However, at a low ask and just before the turn of another major shift, Snap will undoubtedly be an enticing proposition to potential suitors. Either way, the platform continues to grow, which is another point that it highlights in its SEC guidance note:
“We remain excited about the long-term opportunity to grow our business. Our community continues to grow, and we continue to see strong engagement across Snapchat, and continue to see significant opportunities to grow our average revenue per user over the long term.”
Current challenges will force Snapchat to slow down it’s hiring pace for next year, meaning that it might lag a bit behind the competition in terms of AR advancement.
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