Snap collapses in the face of more disappointment with the results

Shares of Snap (NYSE: ) fell sharply on Wednesday after the social media giant missed consensus estimates for fourth-quarter 2022 earnings. The company posted adjusted earnings per share of 14 cents for the quarter, compared with analysts’ expectations of 11 cents a share. .

Revenue was $1.30 billion in the quarter, slightly below analysts’ estimates of $1.31 billion. The social media company is struggling to survive a difficult 2022 as the slowing global economy forces companies to cut their digital advertising budgets. Snap’s fourth-quarter revenue was up slightly from a year ago.

According to StreetAccount, the company reported 375 million global daily active users (DAUs) during the quarter, while analysts expected 375.3 million. Average revenue per user was $3.47 in the quarter, compared to the consensus estimate of $3.49.

Another disappointment for Snap

The results are the third time in a row that Snap has posted results that fell short of expectations. This time, the social media company blamed the disappointing second and third quarter reports on a “difficult year” characterized by “macro headwinds, changes in platform policies and increased competition.” Annually, Snap’s revenue is expected to grow 12% to $4.6 billion in 2022.

The Santa Monica, Calif.-based company said it would not issue guidance for the next quarter. However, the company said in a letter to investors that its “internal forecast” calls for a 2% to 10% decline from the previous year.

The company said in the letter:

“On the monetization side, we expect the operating environment to remain challenging as we expect the headwinds we experienced last year to continue into the first quarter.”

Snap said its Snapchat+ service had more than 2 million paying subscribers in the fourth quarter. Launched last summer, the service represents a subscription plan that gives users access to additional and exclusive features such as longer story endings, custom notification sounds and camera color borders for $3.99 per month.

After struggling last year, Snap announced in August that it would cut 20% of its workforce, or more than 6,000 employees. The company also canceled several projects in 2022, including premium Snap Original streams and a flying selfie drone.

Regulating winds ahead

Snap’s report marks a weak start to the fourth-quarter earnings season for ad-dependent companies. Investors should get more information on market conditions later this week when companies such as Meta Platforms (NASDAQ: ), Alphabet (NASDAQ: ) and Amazon (NASDAQ: ) report their results.

In addition, there is no indication that 2023 will be an easier year for US social media companies, which will face a number of new legal challenges at the state and federal level, as well as regulatory implications. Most US state legislatures have proposed or passed bills aimed at reforming how social media companies modify their content and protect US users.

Meanwhile, the Supreme Court is set to hear at least four major cases against internet companies, including their liability for attempted terrorist attacks and the censoring of conservative views on their respective platforms. Two state and federal lawsuits announced earlier this month are trying to determine how social media apps and their algorithms affect the mental health of American teenagers.

A few weeks ago, Seattle Public Schools and the Kent School District filed a lawsuit against TikTok, Instagram, Facebook, YouTube, and Snapchat, alleging that they promote “content harmful to youth, such as anorexia and eating disorders.”

“We cannot ignore the mental health needs of our students and the role that social media companies play,” they said.

Recently, Utah Governor Spencer Cox said he was considering filing a similar lawsuit, saying the state would focus on protecting young people.

Is the TikTok ban in the US a breath of fresh air?

At the same time, TikTok is struggling to stay afloat in the US, where it has more than 100 million users. China’s internet hotshot has faced a ban from the world’s biggest tech market. In addition to being banned from installing the app on federal and state-owned devices, TikTok owner ByteDance could be banned from doing business in the U.S. and have its app removed from Google and Apple (NASDAQ: ) app stores.

In theory, it would not be illegal for users to use the TikTok app, but it would be more difficult for them to obtain the app. However, it is not certain that the US government will commit to such a big step.

If so, it would be a similar approach to China, which has banned all popular US apps, including Twitter (NYSE:), Instagram, YouTube and Facebook.

To avoid the ban, ByteDance has spent millions of dollars trying to convince American critics that it did not receive orders from the Chinese government and did not provide it with information about American users. The social media company also spent more than $1 billion on Project Texas, an initiative to rebuild TikTok on its US servers to separate it from ByteDance and China.

The result

Shares of Snap fell this week after the social media company once again disappointed investors. A weaker-than-expected forecast sent shares lower, with Snap blaming changes to its ad products that could be “disruptive” to its business.

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Shane Neagle is the EIC of The Tokenist. For weekly analysis of the biggest trends in finance and technology, check out The Tokenist’s free newsletter, Five Minute Finance.

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