Snap, Snapchat’s parent company, reported its second consecutive decline in quarterly sales on Tuesday as it continued to struggle to bring in more ads.
The social media company reported $1.07 billion in revenue for the second quarter, down 4 percent from a year earlier. In April, Snap reported a 7 percent drop in revenue from a year earlier, the company’s first quarterly decline in sales since going public in 2017.
Snap posted a net loss of $377 million for the second quarter, which was narrower than it was a year ago but its sixth straight loss.
“Our revenue growth continued to be challenged,” Snap wrote in an investor letter with the financial results, acknowledging that “we are still a long way from achieving the revenue growth we aspire to.”
Snap, which is led by one of its founders, Evan Spiegel, is grappling with an industry-wide advertising downturn caused by a broader economic slowdown. Over the past year, the company has made layoffs, reprioritized some of its business initiatives and reorganized some of its executives to deal with challenges.
However, even as sluggish ad spending has hurt big tech companies like Google and Meta over the past year, Snap’s problems have been particularly difficult. As a smaller social media company with a narrower audience, it’s not always the first stop for advertisers. And it faces stiff competition from rivals like TikTok, which gained users more quickly and is now bigger than Snap.
In the investor letter, Snap said it made changes to its advertising platform this year to try to increase the number of users who interacted with an ad after clicking on it. The company said that some large advertisers were “disrupted,” adding that the shift would nonetheless lead to “sustainable revenue growth over time.”
To boost ads, Snap has also tried to attract more creators with a revenue sharing program and has tested sponsored links in an AI-powered chatbot, My AI, where users receive ads based on their chat history with the bot. To diversify sources of income, Snap launched a subscription service called Snapchat+ last year, and it has gained more than four million users.
However, the company’s challenges are likely to continue. These new initiatives have “not really been enough to move the field for business yet,” said Jasmine Enberg, an analyst with Insider Intelligence. “I don’t expect the advertising business to start to turn around until the economy does,” she added.
For the current quarter, Snap expected its revenue to be $1.07 billion to $1.13 billion, just meeting Wall Street’s estimate of $1.13 billion.
One of Snap’s bright spots has been its user count, which has skyrocketed. The number of daily active users reached 397 million in the second quarter, up 14 percent from a year earlier. Most of that growth has come from outside the United States, the company said.