Snap Inc. (SNAP) is shifting its focus to bolster its advertising business and augmented reality offerings, CEO Evan Spiegel revealed to employees on Tuesday. This move comes as Snap faces intense competition from social media giants like Mark Zuckerberg’s Meta Platforms Inc. (META) and Bytedance’s TikTok, all vying for a share of the lucrative ad revenue pie.
Spiegel acknowledged that despite progress, Snap’s ad business is growing at a slower pace compared to its rivals. This sentiment echoes the company’s weak forecast for the current quarter, attributed to a decline in advertising spending. Snap is now projected to generate $5.34 billion in revenue for fiscal 2024, according to LSEG data. Notably, Snap’s stock has experienced a significant downturn this year, plummeting by approximately 45%.
To address these challenges, Snap is introducing new ad placements powered by machine learning and automation, aiming to optimize efficiency and reach. “You may be wondering why, with all of the progress we’ve made in our business over the last year, our share price performance has lagged the overall market. The answer is simple: our advertising business is growing slower than our competitors,” Spiegel explained, as reported by Reuters.
Beyond advertising, Snap is also investing heavily in augmented reality (AR) and smart glasses, mirroring Meta’s foray into these technologies. “We are investing in creating augmented reality glasses that allow people to interact with computing, the world, and one another in totally new ways,” Spiegel emphasized. In June, Snap introduced generative AI tools, allowing users to apply more realistic effects while filming themselves with their phone cameras, showcasing its commitment to AR innovation.
Snap’s recent strategic shift reflects a turbulent period for the company. While its second-quarter earnings revealed an increase in daily active users (9%), revenue fell short of expectations, leading several analysts to revise their forecasts downward due to weak sales. CNBC’s Jim Cramer even labeled Snap as “not investable,” further impacting investor confidence. Later in the month, Snap’s stock chart exhibited a “Death Cross,” a bearish signal that has sparked concerns among investors.
Snap Inc.’s stock closed at $8.86 on Tuesday, marking a 5.14% decline for the day. In after-hours trading, the stock dipped slightly by 0.11%. Year-to-date, Snap’s stock has depreciated by 45.11%. Since its initial public offering in March 2017 at $27.09, the stock has experienced a significant drop of 67.29%, according to Benzinga Pro data.
Snap’s strategic shift, driven by a desire to regain momentum and navigate the competitive landscape, will be closely watched by industry observers and investors alike. The company’s future success hinges on its ability to effectively leverage advertising, AR, and innovation to capture a larger share of the digital landscape.
