What you need to know
- Snapchat's parent company Snap has missed its Q3 revenue target.
- Shares in the company plunged 25% as it revealed Apples' privacy changes in iOS 14 have crushed its advertising business.
- It says it will focus on first-party solutions.
Snapchat's parent company Snap has revealed it missed its earnings target for Q3 because of privacy changes made to iOS 14 by Apple, causing shares in the company to plunge 25%.
On Thursday Snapchat announced that its revenue had increased 57% year on year to over $1 billion for the first time. Snapchat has 306M daily active users, up from 293M in July of this year. Despite this, Snap shares fell by a massive 25% on the back of news that Snap missed its Q3 earnings targets, in part because of changes made by Apple to privacy and ad tracking on all of its best iPhones.
Chief Business Officer Jeremi Gorman said on a call to investors:
Thanks, Evan. In Q3, we generated total revenue of $1,067 million, an increase of 57 percent year-overyear, as we grappled with industry changes to the way advertising is targeted, optimized, and measured on iOS that created a more significant impact on our business than we had expected.
Gorman says Snap is "continuing to work through the ongoing changes to digital advertising driven by Apple's App Tracking Transparency framework." It says it saw meaningful adoption in June and July, and that the changes "have upended many of the industry norms and advertiser behaviors that were built on IDFA, Apple's unique device identifier for advertising, over the past decade, which now require a double opt-in by users in order to access directly."
Gorman said Apple's new SKAdNetwork (SKAN) solution that lets advertisers track the performance of their advertising has not performed as expected:
The initial results we observed using SKAN were generally aligned with prior industry-standard solutions, and we were among the first platforms to lean into this solution and push for widespread industry adoption. 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.
Gorman said Snap's partners had found a "variety of concerns about its limitations", for example, they can no longer see measurements like the time between viewing an ad and a user taking action as a result. He also highlighted reporting delays and how advertisers "are unable to target advertising based on whether or not people have already installed their app."
Snap said that as a result of this, it was focusing more on "first party privacy-safe solutions", and that otherwise, it continued to see "strong, sustained performance in our app advertising platform."
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