Snap Q3: $1.07B revenue, up 57% YoY, vs. $1.10B est., DAUs up 23% to 306M, net loss down 64% to $72M, blames iOS ATT changes for revenue miss; stock down 20%+

- Snap reported its third-quarter earnings on Thursday, missing revenue expectations after Apple's iPhone privacy changes disrupted its advertising business. Source: Snap .

CNBC 2021-10-22 Salvador Rodriguez

Context & Ripple Effects

Snap entered this quarter after a 17% Q2 revenue increase in 2020 alongside 17% daily-user growth; the current report preserves strong user growth but identifies Apple’s ATT changes as a break in the advertising business’s revenue performance.

The significance is borne out in later coverage: Snap’s Q2 2022 revenue growth slowed to 13% even as daily users continued to rise, separating audience expansion from the company’s ability to monetize it.

First-order effects

Snap misses its revenue expectation despite 306M daily active users and a sharply smaller net loss, while its shares fall more than 20%.
Apple’s ATT changes immediately disrupt Snap’s advertising business, making its user growth less directly convertible into expected ad revenue.

Second-order effects

Advertisers using Snap must contend with an ad environment disrupted by ATT, increasing pressure on Snap to demonstrate that campaign spending can still be measured and monetized effectively.
Snap’s later results show daily users continuing to grow while revenue growth slows, shifting investor scrutiny from audience scale toward revenue generated from that audience.

Third-order effects

If Apple-controlled privacy changes continue to reshape ad measurement, ad-dependent apps such as Snap will have less control over the data conditions underlying their monetization models.
The pattern points toward mobile platforms’ policy decisions becoming a structural factor in advertising companies’ revenue predictability and market valuation.

The trend: Mobile privacy-policy changes are separating user growth from advertising monetization for platform-dependent consumer apps.

Discussion

@patrickmcgee_ Patrick McGee on x
*Breaking* @Snap blames @Apple privacy changes for Q3 earnings miss and says Q4 revenues will come in between $1.16bn and $1.2bn, versus consensus estimate of $1.4bn. *a Thread*
@cnbcnow @cnbcnow on x
Facebook, Twitter, Pinterest shares also dive in post-market trading after Snap misses revenue expectations due to Apple iOS privacy changes https://www.cnbc.com/... https://twitter.com/...
@shiraovide Shira Ovide on x
In theory, this warning from Snap isn't a great sign for any company that sells ads, including giants like Google, Facebook, and Amazon. https://twitter.com/...
@gosubb Gopi Subbaraj on x
@eric_seufert I was very surprised by Evan's confidence in SNAP's previous earning calls. Even today he was talking about problems with Ad attribution but nothing about the loss of targeting signals.
@megancgraham Meg Graham on x
$SNAP CEO Evan Spiegel on iOS 14.5 impact: “While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure & manage their ad campaigns for iOS”
@carnage4life Dare Obasanjo on x
Snapchat stock down 25% after Apple's privacy changes caused a revenue miss for their ads business. As I've stated in the past Apple unilaterally chose to decimate the mobile ads economy to grow their ads & subscriptions revenue under the guise of privacy https://www.cnbc.com/...
@richlightshed Rich Greenfield on x
$SNAP on Apple's SKAdNetwork #SKAN “However, over time, we saw SKAN measurement results diverge meaningfully from the results we observed on other first and third-party measurement solutions, making SKAN unreliable as a standalone measurement solution.”
@patrickmcgee_ Patrick McGee on x
How ads were working, and on which audiences, used to be real time and granular, but on iOS it is now delayed up to 72 hours and only available in the aggregate. This has transformed much of the tailored ads industry into something more like a traditional billboard.
@munster_gene Gene Munster on x
This will take six months to a year for the industry to get their hands around the changes to Apple. On top of Apple, advertisers are cutting spending because of the lack of supply and labor shortage. This means auction based ad pricing is declining.
@patrickmcgee_ Patrick McGee on x
Snap chief of business Jeremi Gorman dismissed Apple's tool (SKAdNetwork), calling it “unreliable as a standalone measurement solution.” He said measurements “diverge meaningfully from the results we observed on (other measurement solutions).” https://twitter.com/...
@carnage4life Dare Obasanjo on x
@mdhardeman The tie is as app developers make less money from ads, they'll try to make the revenue up via subscriptions and Apple takes a 30% cut of IAP revenue from subscriptions. For example, Twitter sold their 3rd party ads business and is focusing on subscriptions https://blo…
@sonofuhgunn Kyle on x
“Oh, did somebody get addicted to spying on their users?” https://twitter.com/... https://twitter.com/...
@patrickmcgee_ Patrick McGee on x
As a result, some advertisers are throwing more money at “safe havens” where granular details are still available — namely on Android and Apple Search Ads. Hence this scoop: https://www.ft.com/...
@richlightshed Rich Greenfield on x
$SNAP calls out ios14 #ATT for part of their revenue miss @evanspiegel remarks: “we missed the lower end of our guidance by $3 mm due to a few key factors, including changes to advertising tracking on iOS and macroeconomic factors that have impacted our advertising partners”
@pkafka Peter Kafka on x
Snap, like Facebook, says Apple ad changes hurt their biz: “While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult... to measure and manage their ad campaigns for iOS.”
@sarthakgh Sar Haribhakti on x
Snap trying hard to find a sophisticated way of saying “Apple fucked us”
@megancgraham Meg Graham on x
$SNAP CBO Jeremi Gorman says in prepared remarks that initially results using Apple's SKAdNetwork were in line with other industry solutions, but over time found it to be “unreliable as a standalone measurement solution.”
@eric_seufert Eric Seufert on x
@MarceloPLima I found that strange at the time. Perhaps he didnt fully grasp the consequences of ATT!
@munster_gene Gene Munster on x
Bottom Line: Snap will get through this because all that matters is engagement. DAUs are expected to grow at 20% in December, compared to 23% in September. Eventually the industry ad tools will navigate Apple changes and Snap will monetize its fast growing base.
@digitalshields Mike Shields on x
We spent so much time agonizing over the cookie what Google was doing to everyone when Apple just knocked the whole digital ad industry on its ass
@marceloplima Marcelo P. Lima on x
@eric_seufert Not very intuitive given how much Spiegel was praising Apple's ATT move as being in line with Snap's privacy focus
@scobleizer @scobleizer on x
Bad afternoon for SNAP. Apple's power is stunning and will affect many companies soon. Is that good? Of course not but we won't act because we are about to get better football in return. And better metaverse kinda stuff. https://twitter.com/...
@megancgraham Meg Graham on x
Gorman con'td: “Every advertiser has their own unique, fine-tuned perspective on the optimal parameters to measure ROI for their business, but SKAN requires them to use Apple's fixed definitions of advertiser success.” $SNAP
@patrickmcgee_ Patrick McGee on x
Feb 5, @cnbc headline: Unlike Zuckerberg, Snap CEO Spiegel says Apple's iPhone privacy change is good for consumers https://twitter.com/...
@pixeldetracking @pixeldetracking on x
In-Apps surveillance advertising bubble is bursting on iOS (bis) https://twitter.com/...
@eric_seufert Eric Seufert on x
$SNAP down 25% on ATT frictions. Who could have guessed. https://twitter.com/...
@kurtwagner8 Kurt Wagner on x
Snap says supply chain issues are hurting advertising. Businesses don't wanna pay to promote products they can't create/fulfill. Holiday quarter looking grim for ad companies. That news sent $SNAP stock down ~23% FB, Twitter + Google stock also dipped https://www.bloomberg.com/..…
@carnage4life Dare Obasanjo on x
That online ads businesses and advertisers would suffer massively from ATT was obvious a year ago. That the media only knew how to frame it a particular way is why I only get my analysis from newsletters these days: @benedictevans, @packyM & @benthompson. https://twitter.com/...
@patrickmcgee_ Patrick McGee on x
Facebook, like Snap, did not say advertisements were actually performing any worse, but it conceded it had become difficult to model conversions accurately and it estimated it was “underreporting iOS web conversions by approximately 15 per cent.”
@htsfhickey Fred Hickey on x
Facebook -22pts (6.4%) after hours. Google -76 pts (-3%). The potential hit from Apple's rule change has been known for a long time - but investors ignored it (as well as many other real risks) as they continued to pile into FAANG in a greed-driven frenzy in this mkt. bubble.
@thestalwart Joe Weisenthal on x
So now the supply chain crisis is hurting digital media stocks. What's the point of advertising stuff if you can't get your goods off the boat? https://www.bloomberg.com/...
@jason_kint Jason Kint on x
how do you like them apples? It certainly appears Snapchat followed Facebook's new privacy improvements. There will be more blood with Facebook unless they are abusing the market. The FB+G collusion allegation being unsealed tomorrow morning makes me think they won't... https://t…
@patrickmcgee_ Patrick McGee on x
The upshot is that Snap will need to rebuild its ad infrastructure. Spiegel said the group is “working on building flexible first-party tooling and measurement solutions.” This suggests Snap will rely less on Apple's SKAdNetwork.
@digitalshields Mike Shields on x
@mjbarash You are saying the average industry observer, or even marketer, fully grasped this? Most know what cookies are- they aren't walking around like, “you know what's vital? MAIDs. Gosh this ATT thing watch out”
@carnage4life Dare Obasanjo on x
@GavinSBaker @alexdbauer Wild that we went from Microsoft being sued for shipping a browser in the OS as anti-competitive to Apple deciding to redefine privacy on their OS in a way that caused the ad revenue to flow from social apps to App Store ads and got praised for it. How th…
@keleftheriou Kosta Eleftheriou on x
😬 How it started, how it's going: 👻 https://twitter.com/...
@eric_seufert Eric Seufert on x
@RichLightShed Yup. Apple detonated a nuke at the heart of the mobile advertising ecosystem with ATT and is sending in robots to salt the Earth with iOS 15 https://mobiledevmemo.com/...
@richlightshed Rich Greenfield on x
$SNAP #iOS15 changes — oh vey “We expect that the measurement and optimization foundations of the digital advertising economy will continue to experience significant changes in the months ahead, including additional disruptions we expect related to the adoption of iOS 15.”
@patrickmcgee_ Patrick McGee on x
Snap's logic echoes what Facebook said a month ago when it informed advertising clients that it had “gotten harder to measure (the effectiveness of ad) campaigns on our platform” and said that many businesses were experiencing a “greater impact” than expected from Apple's changes
@milesjbuergin Miles on x
You're down bad? Like $SNAP's stock price bad? https://twitter.com/...
@eric_seufert Eric Seufert on x
Yup. Now think about every other CEO that was equally confident / dismissive regarding ATT over the last few quarters. The ATT bomb was placed in April but it only detonated in Q3. https://twitter.com/...
@jason_kint Jason Kint on x
I would argue the analysts are also at fault - their lack of attention to the Apple changes has been embarrassing as they played along with Facebook's talking points. Snap is being super transparent and taking the hit here. Respect to them, they'll come out stronger.
@munster_gene Gene Munster on x
Where to start with Snap? The macro: Apple (IDFA) has sent a shockwave through the app based advertising business. This is the reason why companies like Snap and Facebook don't like Apple.
@charliebilello Charlie Bilello on x
Snapchat Daily Active Users (millions)... Q3 '21: 306 Q3 '20: 249 Q3 '19: 210 Q3 '18: 186 Q3 '17: 178 Q3 '16: 153 Q3 '15: 94 Q3 '14: 62 YoY % Change... Q3 '21: +23% Q3 '20: +19% Q3 '19: +13% Q3 '18: +4% Q3 '17: +16% Q3 '16: +63% Q3 '15: +52% $SNAP
@johnkicklighter John Kicklighter on x
$SNAP reported a 3Q revenue miss ($1.07bln vs $1.10bln expected) but a beat on EPS ($0.17 vs $0.08). Slightly up after hours, but not the kind of showing that usually inspires big investment funds in
@caylenb @caylenb on x
lol adpocalypse gooooooooo forever also from what I've been hearing from marketing peeps, a lot of the real Facebook turmoil has little to do with their absolutely dogshit public image & scandal and more that their ad revenue is total dogshit this upcoming quarter https://twitter…
@richlightshed Rich Greenfield on x
$SNAP also calls out supply chain issues with brands/advertisers in Q3 “This impact was compounded by the ongoing macroeconomic effects of the global pandemic, with our advertising partners facing a variety of supply chain interruptions and labor shortages.”
@htsfhickey Fred Hickey on x
Social media co. Snapchat guides current qtr. sharply lower as changes to Apple's privacy rules are negatively impacting their ad revenues. Snap plunges 25% in After hrs trading. Impacts lots of others with similar advertising-dependent revenue models. https://www.wsj.com/...
@fosspatents Florian Mueller on x
On the last day of evidence and testimony of the #EpicvApple trial he defended Apple's App Store monopoly abuse in a media report. Sounds a bit different now. https://twitter.com/...
@munster_gene Gene Munster on x
Effectiveness of advertising measurement tools that have been used for a decade have been dramatically diminished first starting in the summer with Apple's opt-out of tracking and second with the September release of iOS 15.
@eric_seufert Eric Seufert on x
For anyone wondering how Apple's ATT privacy policy could have created such a dramatic burden on Snap's business: I wrote this primer on how the IDFA is / was used for ad targeting by digital ad platforms like FB and Snap back in January https://mobiledevmemo.com/...
@jason @jason on x
If @Apple is serious about privacy they should buy @DuckDuckGo or make them the default search engine and tell @google to keep their $15b pay off.
@alexeheath Alex Heath on x
have a feeling this isn't the last social media co. to blame Apple for a bad quarter https://twitter.com/...
@drbarnard David Barnard on x
SKAdNetwork is terrible, that's now obvious. But was it malice or incompetence? That's an important question for the future of so many companies. https://twitter.com/...
@teroterotero Tero Kuittinen on x
Good Lord, Apple really is gutting Snapchat. Down -21% after hours due to Apple's kneecapping.

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