SANTA MONICA: Snapchat’s corporate parent, Snap Inc., revealed during its third-quarter earnings call that its ad sales were being hit by a privacy crackdown rolled out on Apple’s iPhones earlier this year.
The disclosure raised investor fears that the app’s financial growth was going into tailspin, sparking a sell-off in after-hours trading that could foreshadow one of the biggest one-day drops in the company’s stock since it went public in 2017.
Snap’s shares plunged by nearly 22 percent in Thursday’s extended trading. If the decrease was mirrored in Friday’s regular trading session, it would approach the stock’s previous one-day nadir in May 2018 when its price also plummeted by nearly 22 percent — a decline which would wipe out nearly $30 billion in shareholder wealth.
The alarms set off by Snap’s disappointing performance could foreshadow troubles for other apps that may be having more problems tracking their users’ online activities because of an Apple update to the iPhone’s iOS software released in April.
The change blocks online tracking on iPhones unless a user grants explicit permission to do so, making it difficult for companies that sell ads based on the information they collect about people’s interests and location.
In a statement, Snap chief executive officer, Evan Spiegel, said the company has had to recalibrate its operations to “navigate significant headwinds, including changes to the iOS platform that impact the way advertising is targeted.”
Facebook, an outspoken critic of Apple’s new privacy controls, had already told investors that its ad sales could suffer because of the change, but Snap’s results indicated the blow may be even bigger than Wall Street anticipated. Facebook’s shares shed more than 4 percent in Thursday’s extending trading. The social networking company is scheduled to release its latest quarterly results on Monday.
Snap reported revenue of $1.07 billion for the July to September period, a 57 percent increase from the same time last year, but that was about $30 million below the projections of Wall Street analysts who steer investor expectations.
Perhaps even more troubling to investors, Snap predicted its revenue for the current quarter would range from $1.17 billion to $1.21 billion, whereas analysts had been forecasting revenue of $1.36 billion, according to FactSet.