A social media warning sign

The wild growth that Snapchat and other social media companies have experienced during the lockdown phase of the COVID pandemic is looking further and further in the rearview mirror.

Shares of Snap Inc. tumble in pre-market trading Friday after the company reported disappointing financial results, missed second-quarter earnings and revenue estimates and showed signs of flattening user growth in North America and Europe.

Snap reported a loss per share of 2 cents, compared to a consensus estimate of 1 cent quoted by CNBC. Revenue for the quarter was $1.11 billion, compared to expectations of $1.14 billion, which were already modest. Snap’s average revenue per user was steady at $3.20, much lower than last year’s peak of $4.06 in the fourth quarter.

Notably, Snap also reported a net loss of $422 million, significantly worse than the $152 million it lost in the prior period.

Snap’s global active user base grew to 347 million, which beat consensus estimates and represented an 18% growth compared to the same period last year. But much of that growth came from areas outside of North America and Europe, where Snap reported quarter-over-quarter growth of just 1 million and 2 million users, respectively, indicating the company is maturing in those key regions.

[Source Images: Snap Inc.]

In a statement, Snap CEO Evan Spiegel acknowledged the challenging environment and indicated that the company would “develop” some of its business objectives, including heavier investments in direct response advertising and alternative revenue streams. “While the continued growth of our community enhances long-term opportunities for our business, our second quarter financial results do not reflect our ambition,” said Spiegel.

Investors were clearly shocked by the news. As of early Friday morning, Snap’s stock fell more than 30% in pre-market trading. The stock has fallen more than 60% so far.

And other social media companies are also feeling the heat. Meta, the parent company of Facebook, saw shares plunge more than 4% after Snap’s earnings were released, while Twitter fell nearly 3%.

In a sense, all these US-based companies suffer from the same problem, which is TikTok, which has become hugely popular with younger users over the past two and a half years and continues to outpace its more established competitors in terms of user growth. TikTok is owned by China-based ByteDance, which is privately owned.

This post A social media warning sign was original published at “https://www.fastcompany.com/90771854/snap-stock-price-tanks-in-a-warning-sign-for-social-media-investors-heres-what-happening?partner=rss&utm_source=rss&utm_medium=feed&utm_campaign=rss+fastcompany&utm_content=rss”

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