Shares of developer Snapchat Snap tumble after projecting prolonged drop in ad revenue following introduction of Apple’s privacy tools for iPhone

Shares in messaging company Snap plunged after the company said it expected prolonged effects of Apple’s privacy changes on its iOS devices.

Shares of the Snapchat developer traded down around 25% in the United States on Friday night after the release of its quarterly financial results, with shares of other ad-dependent companies such as Alphabet, Facebook and Twitter having also dropped by about 3-6%.

Apple’s privacy updates, released in June and July, prevent advertisers from tracking iPhone and iPad users without their consent.

They follow the release of iOS 14.5 in April which introduced the App Tracking Transparency (ATT) system.

Advertising slump

As a result, advertisers couldn’t measure and manage their advertising campaigns for iOS and were spending significantly less on advertising, Snap said.

“While we anticipated some degree of business disruption, the new measurement solution provided by Apple did not evolve as we expected,” the company added.

Apple has provided a proprietary ad tracking system for iOS called SKAdNetwork, or SKAN, but Snap said the service’s metrics have been found to “diverge significantly” from other tools, making it “unreliable. as a stand-alone measurement solution “.

“Advertisers are no longer able to understand the impact of their unique campaigns based on factors such as the time between viewing an ad and taking an action or the time spent viewing an ad,” said Snap said in a statement.

Disturbance

The company said that Apple’s changes “overturned many industry standards and advertiser behaviors that were built on IDFA, Apple’s unique device identifier for advertising, over the course of the last decade, which now require a double membership of users to access it directly “.

Snap’s remarks and investor reactions to them show just how disruptive Apple’s changes are to the digital advertising world, at least in the short term.

Some analysts have said the impact of the privacy changes will last until next year as Snap prepares its own ad tracking tools.

The impact on Snap’s fourth-quarter outlook was “worse than virtually everyone expected,” JP Morgan analyst Doug Anmuth said in a research note.

But he said the effect on Snap is expected to be worse than on Alphabet, Facebook or Twitter, none of which have yet released September quarter results.

Supply chain issues

Snap said the advertising problem was compounded by the macroeconomic effects of the pandemic, with advertisers facing supply chain disruptions and labor shortages, which in turn reduced their desire to advertise.

Snap forecast fourth-quarter revenue of $ 1.165 billion to $ 1.205 billion, well below analysts’ estimates of $ 1.36 billion. It posted third-quarter revenue of $ 1.067 billion (£ 780 million), up 57% year-over-year.

Several analysts have speculated that Apple’s privacy system could form the basis of an advertising network project.


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