Snap reported a 7% fall in revenue to $US988.6 million for the March quarter as it faces an uncertain economic climate, strong competition and some fallout to changes in its advertising platform.
The social media platform hit 383 million daily active users in the three months to March, up 15% on the same quarter last year.
But the average revenue per user was $2.58, down from $3.20 in the same quarter last year.
And the net loss was $329 million compared to $360 million in the 2022 March quarter.
Snap hasn't provided guidance for the June quarter.
But it is pulling in costs with operating expenses down 6% to $553 million.
Employee-related costs were down 12%. Snap ended the March quarter with 5,201 full-time staff, down about 21% from a peak in the September quarter of 2022.
CEO Evan Spiegel says Snap is deepening engagement while building new features and services such as My AI.
"We are working to accelerate our revenue growth and we are using this opportunity to make significant improvements to our advertising platform to help drive increased return on investment for our advertising partners," he says.
Snap says the economic environment continues to be a headwind to revenue growth.
However, the company is transitioning to an ad format that is consistent across the content Snapchatters’ view.
“We’ve also identified new areas to invest in machine learning to accelerate our content and ad platform ranking and optimisation efforts, and we are excited about the long-term potential of our business as we identify new ways to improve return on investment for advertisers,” says Snap in a letter to shareholders.
Snap says it expected demand to be disrupted by changes made to its ad platform to drive more click-through conversions.
“While these changes are disruptive in the short term, we are optimistic that our ad platform improvements are laying the foundation for future growth,” says Snap.
“We believe that delivering stronger return on ad spend (ROAS) and performance for our advertisers will enable us to increase our share of wallet over time in this highly competitive environment.”
Jasmine Enberg, principal analyst at Insider Intelligence, says Snap’s march quarter revenue decline is a signal of deep challenges.
“While there’s no lack of innovation at Snap, its core ad business is in trouble due both to the economy and its unique position in the social ad market.
"Snapchat isn’t a textbook ad-supported platform like Facebook or Instagram: Snapchat users primarily use the app for messaging, and messaging apps are notoriously difficult to monetise.
"In Q1, that problem continued to be exacerbated by Snap’s strong association with AR, the headwinds from Apple’s privacy changes, and Snapchat’s small size relative to the social platforms that advertisers bucket the app with."
"Looking forward, Snap is clearly looking to AI to help it bounce back. While the MyAI chatbot has yet to contribute meaningfully to Snap’s bottom line, it’s already a hit among Snapchat+ subscribers.
“Now that all users have access to MyAI, Snap must be thinking about how it can use the chatbot to drive its ad business beyond increasing engagement, like using search behaviours to serve targeted first-party advertising.
"But the challenge for Snap as it continues to innovate in generative AI, AR, creators, public Stories and Spotlight isn’t just funding those investments.
“Snap must also ensure that it doesn’t lose sight of its core use cases and alienate its loyal audience: MyAI’s rollout has already disgruntled some users. And while many of Snap’s recent moves make it a stronger competitor to TikTok, Snap can’t count on a possible TikTok ban to solve its revenue growth problems."
Snap March quarter 2023:
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