Snap’s Fourth Quarter Revenue Was the Company’s Slowest Growth Since Its IPO Six Years Ago

Snap Inc.’s trend of growing its user base but failing to adequately monetize them continues.

The company reported its fourth quarter and 2022 annual earnings Jan. 31, and almost immediately, the market reacted negatively to news that after 12 years of operations, Snap still hasn’t found a way to achieve profitability with its camera app.

Snap’s been steadily growing its daily active user base the entire past fiscal year. In fact, it posted positive user growth every quarter in 2022, on average adding about 18% more users each quarter. Snap ended the year with 375 million users, another 18% increase annually.

But the trouble for Snap – and beleaguered CEO Evan Spiegel – is finding a way to squeeze enough money out of these users to keep the company afloat. At this point, just having a growing user base isn’t enough, and profitability seems more like a pipe dream each quarter that Snap reports it’s failed to monetize its loyal demographic.

Snap ended the 2022 fiscal year with revenue up 12% to $4.6 billion, but its net loss skyrocketed. Its fourth quarter revenue didn’t move much from last year, either – in Q4 Snap’s sales were a paltry $1.3 billion, a figure Wall Street analysts expected but the lowest growth figure for Snap ever since it went public in 2017.

And, Snap continues to hemorrhage money. The company’s net loss in 2022 was $1.4 billion, which included $189 million in “restructuring charges.” That’s a steep increase from the $488 million Snap lost at the end of last year. Snap lost $288 million in the fourth quarter, a major blow considering that in the previous year’s fourth quarter, it managed to break even and post net income of $23 million.

In an earnings release Tuesday, Spiegel said the company “continue[s] to face significant headwinds as we look to accelerate revenue growth, and we are making progress driving improved return on investment for advertisers and innovating to deepen the engagement of our community.”

The company is so pessimistic about its upcoming financial situation that it warned it would not provide expectations for revenue in the upcoming first quarter 2023 because of “uncertainties related to the operating environment.”

One way Snap could begin to wring some money out of its user base is through its new premium offering, Snapchat+, which it launched in June. Snap said the service, which offers around a dozen experimental pre-release app features for $3.99 per month, has 2 million subscribers. But that’s a tiny fraction of its overall user base of 375 million willing to pay for the app.

The company will also look to court more advertisers and retain the ones that are still on board. Snap noted in its report that it’s investing in a partnership with BigCommerce, which should allow “tens of thousands” of companies to advertise more effectively. Spiegel said in a shareholder letter Tuesday that Snap is “also working to deepen engagement with our content platform to expand our overall content monetization opportunity.”

Noticeably absent from this quarterly earnings report was mention of Spiegel’s longtime pet project, wearables. Snap’s ill-fated Spectacles camera glasses or Pixy drones were nowhere to be found. Instead, the focus is now on augmented reality; Snap noted to date people have developed over 3 million AR lenses on the app. The company’s using AR for ads, too – Snap said it ran partnerships with retailers including H&M, Adidas and Walmart that encouraged users to virtually try on their products in the app.

Snap’s stock was hit hard as investors realized the company’s sales were stalled. Its stock was down more than 14%, continuing a trend of its value being erased on the heels of lackluster earnings.

Snap said it will share more information about its operations at its annual investor day, Feb. 16 at 9 a.m. PST.