Snap Inc, owner of Snapchat on Thursday beat Wallstreet’s expectations for both user growth and revenue after posting a 62% increase in fourth quarter revenue in the amount of $911 million and 265 million active users, signaling a 55% growth in dasddily active users. But trouble seems to be looming for the photo-messaging app due to Apple’s upcoming huge privacy update.
Apple is planning to release a privacy feature as part of its iOS 14 update early this spring – an update that Facebook’s CEO, Mark Zuckerberg has continuously complained would decrease Facebook’s ad revenue. Apple’s planned update will ask users permission for apps to track them for advertising purposes, but Facebook is accusing the iPhone maker of anticompetitive behavior and hurting the social media giant’s ad-targeting business.
Snap primarily generates revenue from ad sales as advertisers target its mostly young audience. The app has features that appeal to marketers, including Snap Map, which lets users find local businesses near them.
“The disruption to ad targeting caused by the iOS 14 privacy changes will clearly be a worry for Snap, which has been steadily growing its armory of ad formats and advertisers,” said Tom Johnson, chief transformation officer at ad agency Mindshare Worldwide.
Snap Inc stock fell as much as 10% in after-hours trading on Thursday.
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But Snap’s Chief Business Officer Jeremi Gorman struck is assuring customers there is nothing much to worry.
“We admire Apple and believe they are trying to do the right thing for customers,” Gorman said, adding Snap is well prepared to guide advertisers through the iOS changes.
“Overall, we feel really well prepared for these changes, but changes to this ecosystem are usually disruptive and the outcome is uncertain,” Gorman said.
The company said it is estimating first-quarter daily active users to grow 20% year over year to 275 million, and revenue to growth to 60% for the first quarter, Snap’s Chief Financial Officer Derek Andersen said in prepared statement.
Andersen however said the company’s performance in the first quarter could be impacted by two key factors. First, he said that Snap experienced two weeks of interruption to advertising demand as brand advertisers paused campaigns in the period following the Jan. 6 insurrection at the U.S. Capitol.
“Thus we started the quarter slower than we would have otherwise expected.”
Second, Andersen warned that Apple’s upcoming privacy changes in iOS 14, “present another risk of interruption to demand.” Those changes could impact social media companies’ ability to target ads to users.