Snapchat owner’s shares plunged 25 per cent this afternoon after Snap posted deeper losses in the second quarter, as well as dwindling revenue growth.
Revenue grew 13 per cent year-over-year to $1.11bn, compared to roughly 40 percent in the previous two quarters.
Its net loss deepened to $422m, compared to $152m in the prior year.
“While the continued growth of our community increases the long-term opportunity for our business, our financial results for Q2 do not reflect our ambition,” said CEO Evan Spiegel.
“We are evolving our business and strategy to reaccelerate revenue growth, including innovating on our products, investing heavily in our direct response advertising business, and cultivating new sources of revenue to help diversify our topline growth.”
Snapchat’s parent firm said the number of daily active users continued to grow in the quarter, reaching 347m in the quarter, up 18 percent year-over-year. The growth was spread across North America, Europe, and Rest of World.
The firm posted adjusted EBITDA of $7m and free cash flow of negative $147m.
Commenting on the results, Forrester VP research director Mike Proulx said: “While the platform’s user base remains strong, Snap’s ad-centric model is no longer a sure bet and is especially volatile heading into a period of economic headwinds where marketers are sure to pull back their ad spend.
“Revenue diversification won’t happen overnight. Snapchat’s premium subscription play isn’t likely to gain much traction in its early days despite the company’s efforts to differentiate the service with features like desktop messaging and video calls.
Consumers were already facing subscription overload and now they’re being even more discerning over their spending. An additional $3.99 per month is hard to justify when heading into a possible recession.