Snap Shares Soar As It Navigates Apple’s Privacy Push

Snap is grappling with the same problem facing Meta, the social media behemoth formerly known as Facebook: Both have seen their ad businesses stumble because of Apple’s new privacy policy, which makes it harder to send users targeted ads.

But when Santa Monica-based Snap reported its fourth-quarter earnings on Thursday, it told a very different story than the gloomy outlook shared by Meta a day earlier. Whereas Meta blamed Apple for roiling its digital advertising, Snap leaders said they found a way to adjust. In turn, the social media companies’ stock prices have gone in totally different directions.

Snap reported its first-ever profitable quarter, ending a rollercoaster day on Wall Street with its stock price soaring. Its shares surged as high as 61% in after-hours trading, eclipsing $39. That was quite the snap back from how the day started, when Snap shares had plunged more than 23% on the heels of Meta’s disappointing fourth-quarter earnings.

By contrast, Meta lost more than $200 billion in market capitalization Thursday, joining a growing list of major tech companies—including Netflix, PayPal and Spotify—that have had a rough time on Wall Street this earnings season.

Snap reported $22.6 million in net income in the quarter, a 120% improvement from a year earlier, when it posted a $113 million loss. Snap’s revenues were up 42%, to $1.3 billion, beating analysts’ expectations. Its user base grew 20% year-over-year, to 319 million. And it ended 2021 with its first full year of positive operating cash flow.

“We delivered strong results amidst several challenges to our industry, and demonstrated the resilience of our team and our business,” said Jeremi Gorman, Snap’s chief business officer. “These challenges are not behind us, but we are increasingly confident in our ability to navigate them.”

Apple’s privacy policy changes restricted how users are tracked on mobile devices. Beginning in April, Apple allowed consumers to opt out of tracking by software apps, making it harder for them to effectively target users with ads.

Snap’s stock nosedived after its third-quarter earnings report in October, when it reported that the new privacy policy posed a problem. But four months later, Snap officials said they’re working on new ad measurement tools that preserve privacy and are being adopted by advertisers. Meanwhile, Snap’s active advertiser count hit an all-time high.

“We are making solid progress,” Gorman said.

Contrast that with the doom-and-gloom from Meta leaders, who described Apple’s privacy change as “a pretty significant headwind” that would “take us time” to resolve. Meta executives said Apple’s new policy could cost the company up to $10 billion in lost sales this year.

Analysts on Snap’s earnings call Thursday openly wondered how the company managed to navigate this issue better than its rivals. When asked, chief financial officer Derek Andersen said Snap built its business, including its advertising platform, “with privacy by design”—adding that the impact from Apple’s changes are “likely to be experienced differently” at Snap than at other companies. He didn’t mention Meta, a company not exactly known for making privacy a priority.

However, the company’s advertising business “began to recover from the impact of the iOS platform changes quicker than we anticipated,” Anderson noted.

Snap said it will continue to invest big in augmented reality to accelerate its vision for a digitally-overlaid world. Some of those bets are already paying off; it has deployed AR with success as an ecommerce offering. AR is also giving a boost to Snap’s advertising business, as it reported that many brands have increased their investments in AR ads.

“Augmented reality represents one of our most exciting long-term revenue opportunities,” Gorman said. “AR is unique in that it is a fully immersive and interactive experience that delivers a measurable and repeatable return on investment for advertisers.”