Snap Stock Drops as iOS Privacy Changes Impact Ad Revenue

Snap's Q3 Revenue Falls Short of Expectations

During a Thursday earnings conference, Snap announced that its third-quarter revenue did not achieve projected levels. The company’s Q3 revenue totaled $1.07 billion, falling below the $1.1 billion anticipated by Wall Street analysts.

Growth in Daily Active Users

Despite the revenue shortfall, Snap reported an increase in daily active users, reaching 306 million. This represents growth from the 293 million users reported in the previous quarter, Q2.

While the growth rate isn't exceptional, it indicates a positive trajectory for the platform, particularly considering past concerns about its potential decline in relevance.

Impact of Apple's iOS Privacy Changes

Snapchat has directly linked the revenue miss to Apple’s recent iOS privacy update. These changes introduced new limitations on apps attempting to monitor user activity across different platforms.

CEO Evan Spiegel explained during the call that the extent of disruption to advertising tools was unexpected. Advertisers were compelled to adjust to more limited methods of assessing user behavior due to the reduced visibility.

Spiegel stated that the existing advertising tools were effectively hampered by these changes.

Temporary Setback and Market Trends

Spiegel characterized the impact on Snap’s performance as a temporary issue, emphasizing that adaptation to the new environment requires time. The long-term consequences of Apple’s advertising policy changes are still uncertain.

He also acknowledged the influence of broader market trends related to the pandemic on Snap’s results.

Industry-Wide Adjustments

Snap is not alone in navigating the challenges posed by the iOS changes, which prioritize user privacy. Facebook also cautioned that its Q3 results would be negatively affected by Apple’s new policies, impacting its ad targeting capabilities.

User Opt-Outs and Spiegel's Stance

The majority of users are choosing to decline cross-platform tracking when given the option, impacting businesses like Snap and Facebook that rely on this data.

Notably, Spiegel has consistently expressed support for Apple’s commitment to enhancing privacy within its mobile operating system, even acknowledging the potential financial implications for Snap.

Snap’s response highlights the evolving landscape of digital advertising and the increasing importance of user privacy.