Looming Apple privacy changes weigh on Snap despite revenue growth

6:53 pm Thursday, February 04th, 2021

By Sheila Dang

(Reuters) – Snap Inc, owner of popular photo-messaging app Snapchat, on Thursday warned that upcoming privacy changes by Apple Inc could hurt Snap’s ad business although user growth and revenue beat analysts’ fourth-quarter estimates.

Snap stock fell 7% to $54.02 after the bell.

Apple’s planned changes, to ask iPhone users for consent to track their data for personalized ads, could present a “risk” to advertiser demand, Snap said, but added it was unclear how that could affect business in the long-run.

“The disruption to ad targeting caused by the iOS 14 privacy changes will clearly be a worry for Snap, which has been steadily growing its armory of ad formats and advertisers,” said Tom Johnson, chief transformation officer at ad agency Mindshare Worldwide.

Snap’s larger tech rival Facebook Inc has been waging a public fight against Apple’s changes, accusing the iPhone maker of anticompetitive behavior and hurting the social media company’s ad-targeting business.

During an earnings call with analysts, Snap Chief Business Officer Jeremi Gorman struck a different tone, saying that Snap shares Apple’s philosophy on protecting users’ privacy.

“We admire Apple and believe they are trying to do the right thing for customers,” Gorman said, adding Snap is well prepared to guide advertisers through the iOS changes.

Snap’s daily active users (DAUs), a metric watched by investors and advertisers, rose 22% year-over-year to 265 million in the fourth quarter ended Dec. 31. Analysts had expected 258 million, according to IBES data from Refinitiv.

The app made the biggest gains outside North America and Europe, with 55% growth in daily active users.

Revenue, which Snap generates mainly from ad sales, grew 62% to $911 million, easily beating Wall Street’s consensus estimate of $857.4 million.

Advertisers have been drawn to Snap’s young audience, and it has developed features that appeal to marketers, including Snap Map, which lets users find local businesses near them.

Snap’s net loss narrowed to $113 million, or 8 cents per share, from $240.7 million, or 17 cents per share, a year earlier.

The company forecast first-quarter daily active users would grow 20% year over year to 275 million, and revenue of $720 million to $740 million.

(Reporting by Sheila Dang; Editing by Cynthia Osterman and Richard Chang)