The decline in demand for Google search ads and Facebook display ads has stabilised, as both digital advertising giants have reported a slight increase in growth.
Snap, though a smaller firm, faces stiff competition, such as TikTok. Snap was also hit by Apple's privacy changes, which made it more difficult for advertisers to collect information and display highly targeted ads.
Other companies are also still struggling with the advertising slump. YouTube, a Google subsidiary, saw its advertising revenue decline by 3 percent during the first quarter of this year.
Snap was founded by 2011 and became public in 2017. Investors expect rapid growth from this stock. Snap's revenue grew by two times in 2021 compared to the previous year. This has been slowed down dramatically in the past year due to macroeconomic uncertainty, including inflation and rising rates of interest. The result is the decline in this quarter.
Snap's shares fell 65 percent in the past year, dropping its valuation to below $16 billion this week. This is less than the valuation venture capitalists gave to Snap before it went public.
Snap, like many other tech companies, has been reducing staff and cutting back on creative and ambitious projects over the past year. Like many in the tech sector, Snap is investing heavily in artificial intelligence.
Snap has recently launched a chatbot named My AI, which allows Snapchat users the option to chat with it individually or in a group. Users have criticised the bot powered by OpenAI. Snap reported that its users sent more than 2 million messages per day to the Bot.
Snap also wants to increase revenue through subscriptions. Three million Snapchat+ users pay $4 per month to get access to additional features.
Jasmine Enberg is an analyst at Insider Intelligence. She wrote in a recent report that the company has not yet converted the excitement surrounding its new products to revenue. This does not change the "reality that its core business struggles," she wrote.