Snap Warns Supply-Chain Bottleneck Causing Brands To Delay Spending

Apple iOS 15 privacy changes, the bottleneck in the supply chain with the backup of ships in the Los Angeles and Long Beach docks, and the labor shortage in the U.S. will continue to disrupt the advertising ecosystem in the holiday quarter of 2021, executives at Snap told investors late Thursday during the company’s earnings call.

The company executives felt caught off guard by how disruptive the impact of Apple’s privacy changes on advertising tools has been, because it blocks the wide view that many advertisers expect.

“Those tools were essentially rendered blind,” said Evan Spiegel, Snap CEO, during the company’s Q3 2021 earnings call late Thursday.

Apple has released a product called SKAdNetwork that allows advertisers to measure across different advertising platforms, but does not offer a lot of flexibility.

Snap built a product called Advanced Conversions that allows advertisers to understand creative-level performance, and optimize for down-funnel conversions. The challenge is that it only measures Snap first-party data.

Snap Chief Financial Officer Derek Andersen described other factors, but stopped short of providing a specific breakdown of the combined impact between supply chain, labor shortage and iOS privacy.

Snap failed to meet revenue expectations for its third quarter, reporting $1.07 billion in Q3 revenue -- missing Wall Street’s expectations that the company would bring in $1.1 billion.

Andersen said Snap’s brand and direct-response advertising business has been affected. This is the main revenue generator for the company. The supply-chain and labor shortage seen to date during Q4 2021 impacts a variety of advertising partners across many industries.

“Unfortunately, these changes are occurring during the season when our advertising partners would normally expect their supply chains to be operating at peak capacity and other time when we would otherwise expect peak advertising demand to drive contestation and therefore peak prices in our auction,” he said.

Andersen went on to say that other categories are less reliant on the physical supply chain, such as streaming entertainment. Travel and FinTech are also coming back.



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