Snap announces focus on ad business following a 48% stock drop

Greater investment into new AI-powered ad placements is expected to follow

Highlights:

• Snap’s stock has dropped by 48% in 2024, prompting a shift in focus towards ad business improvements.
• Snap’s plans include new ad placements driven by machine learning and augmented reality.

Snap Inc. has announced that it will focus on its advertising business following a significant 48% drop in its stock price. CEO, Evan Spiegel has called on employees to remain committed to the company’s long-term vision, despite the recent underperformance.

In a memo to employees, Spiegel attributed the stock decline to slower advertising growth. “You may be wondering why, with all of the progress we’ve made in our business over the last year, our share price performance has lagged the overall market. The answer is simple: our advertising business is growing slower than our competitors,” he said.

Last month, Snap projected lower earnings for the current quarter due to reduced advertising spending, and it is now estimated to earn $5.34 billion in revenue for fiscal year 2024.

However, Snap’s revenue from direct response ads increased by 16% in the second quarter.

How Snap plans to expand its ad business

Spiegel explained that the company’s future depends on its advertising capabilities. He said that the company is testing two new ad formats. Snap will introduce ads in users’ chat inboxes and also incorporate ads on Snap’s map feature.

Snap plans to also focus on Augmented Reality (AR) advertising and smart glasses technology. “We are investing in creating augmented reality glasses that allow people to interact with computing, the world, and one another in totally new ways,” Spiegel said.

The company has been pushing its augmented reality offerings to attract advertisers. In June, Snap launched generative AI tools that allow users to add realistic effects to videos filmed on their phone cameras.

In 2016, Snap introduced its ‘Spectacles’ smart glasses but sold only 220,000 units which led to a $40 million financial loss. This month, it will unveil new AR smart glasses at its annual summit.

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