Snap stock down on Q4 revenue miss

Yahoo Finance Live anchors discuss fourth-quarter earnings for Snap.

Video transcript

BRAD SMITH: Also, let's talk about Snap. Snap in focus this morning, after reporting mixed earnings. And according to CEO, the flat year over year growth reflected the rapid deceleration in the company's digital advertising growth here. You're taking a look at shares, pre-market, lower by about 12% here.

And one thing that jumped out to me from the call was just what they were sensing in terms of the ad spend and their conversations with their partners, saying that it seems like advertising demand hasn't really improved. But it hasn't gotten significantly worse either. So the big question there is, is the worst of that advertising demand environment starting to be priced in at this point, and coming off of a quarter where those results are finally starting to be realized by the street and how much it would have impacted a brand like Snapchat.

BRIAN SOZZI: Right, Brad. And I think the market also wanted to see some evidence of all the massive cost cutting that this company did. They were, in many respects, one of the early tech plays last year to lay off just thousands of employees. Snap said on that call last night, those bottom line benefits won't really start to be seen until the first quarter.

But still, this was another ugly quarter from Snap. And I think James Heaney over Jefferies absolutely nailed it in his note this morning. He's saying this. "We are concerned that Snap's issues are intensifying as recent ad platform changes further pressure revenue growth and depth of engagement on friends stories." Again, just not a good quarter and not a good outlook from this company. And what that reads through to Meta, unclear, when they report later on. But still, this is a social media outfit that remains very much operationally challenged.

JULIE HYMAN: I think-- so you're going to sense-- viewers they're going to sense a theme throughout the earnings season and today's show in particular. And that is, are the problems at this company specific to this company and reflective of poor leadership? Or are they reflective of the broader economy? We're going to talk to Bill George about that later in the show, the former Medtronic CEO.

And I think it's a really good question for Snap in particular, that sort of encapsulates this, right? Jessica Lessin, over at the information, likened Snap's strategy in her note last night to throwing spaghetti against the wall. It sees what's happening in terms of this slowing demand environment, in terms of slowing ad spend. And it's just trying all these different initiatives to try to get new viewers to come in, new users to come in, and to try to monetize them.

And it's trying Spotlight, which it says had seen some success with. Users are going up, but then the monetization piece needs to come as well. So all of that spaghetti being thrown against the wall, it's certainly not bearing fruit as of yet. And in fact, are we seeing Snap having to go back in order to go forward?

BRAD SMITH: Yeah, and on that user number, 375 million daily active users, that reflected about an increase of 17% year over year. Perhaps there is an inclination to believe that if you did have some of those core consumers that were saying, you know what? I'm not going out shopping at the same rate, because I'm more concerned about how much I'm going to be paying up, or if I'm not going to one kind of physical, social construct or another, because I'm trying to monitor my own discretionary spend, then maybe I'm spending more time in an app, just engaging with my friends.

And for Snap, what they would hope to do is convert a lot of that time that is starting to increase, perhaps, on the shopability within the platform itself too. And that's where they've been investing more. That's where they started to talk about one of the bigger bets that you were mentioning a moment ago in direct response marketing campaigns, that it seems there's still a lot of propensity from some of their partners to spend on right now.

BRIAN SOZZI: Julie, your point on leadership, I mean, it's spot on. And I think it's two-pronged with Snap. But also, I think it leans a little more to leadership. Remember, when we covered that IPO of Snap way back when, they launched as a camera company. And now if you go to the investor relations page, they're a tech company, and they're still not doing well.

JULIE HYMAN: They still are talking about the camera. They're still leaning on the camera angle as well, though.

BRIAN SOZZI: AR.

JULIE HYMAN: They're talking about AR. They were asked on the call also about how they're going to incorporate AI, because it's important to remember, AI isn't just chat and text. It also is visual, right? There's visual AI. There's, now I'm blanking on the name of the company.

BRAD SMITH: Generative AI.

JULIE HYMAN: The one that changes the pictures.

BRAD SMITH: Oh!

JULIE HYMAN: Anyway, we know-- anyway, it all feeds into that. So he talked about that being an opportunity going forward for the company, of course, because every CEO right now is contractually obligated to say they're going to take advantage of AI in some way. So they're definitely on that bandwagon.