Snap Inc. shares tumbled as much as 27% after the owner of the Snapchat app warned that changes to Apple Inc.’s data collection rules and global supply chain issues are weighing on advertising spending, tempering its earnings forecast for the fourth quarter.
The company said it expects revenue of as much as $1.21 billion in the final three months of the year, less than the $1.35 billion that analysts were projecting. It also said adjusted earnings before interest, taxes, depreciation and amortization will be $135 million to $175 million in the period, much lower than the $299.3-million forecast from Wall Street.
“As we look to the fourth quarter, we face a variety of challenges in the operating environment,” Chief Executive Evan Spiegel said on a call with analysts to discuss the results.
This year, Apple started requiring all apps on its iOS 15 platform to get iPhone users’ permission to be tracked for advertising purposes. Device holders have opted to give apps the ability to monitor their behavior just 25% of the time, according to an earlier estimate from Branch, which analyzes mobile app growth.
Snap executives have said its users were opting in to tracking more often than some of the industry’s reported averages, but they won’t know the full effect of the change until later in the year. What’s clear is that the new rules have made it difficult for advertisers to measure and manage their ad campaigns, Spiegel said, and that will continue to affect the business through the end of the year.
At the same time, Snap said its advertising partners across a variety of industries are facing supply chain disruptions and labor shortages. This is occurring at a time when these partners would normally be operating at peak capacity, generating the strongest and most valuable quarter for ad revenue. But marketers can’t advertise for products they can’t sell.
“While it is difficult to predict the duration and magnitude of these macroeconomic factors on the businesses of our partners, we have assumed that these head winds will persist throughout Q4,” said Chief Financial Officer Derek Andersen.
Snap’s warning cast a shadow over larger ad-dependent rivals, including Google, Facebook Inc. and Twitter Inc., whose shares also fell after the report. Snap tumbled to a low of $52.48 in extended trading.
Still, Snap has benefited from the continued migration toward online shopping and digital advertising during the pandemic. Companies of all sizes turned to social media platforms to reach customers who were stuck at home to avoid the spread of COVID-19. As the economy reopens, Snap executives have said they expect more users to turn to the app not just to passively consume entertainment but also to connect with new friends and add updates about their life to their Snapchat Stories — posts that disappear within 24 hours.
Apple’s changes already were affecting Snap’s business in June and July, Spiegel said. In the third quarter, Snap …….