• by Colin Kirkland , April 28, 2023

While Meta's first-quarter earnings report showed a tech giant on the rebound, Snapchat parent company Snap Inc.'s Q1 earnings depict a downturn in its decade-plus history -- missing Wall Street revenue estimates and causing its stock to drop 20% in after-hours trading.

Wall Street estimated that Snap would close out the quarter with $1 billion in revenue, but the company reported $989 million. This is down 7% from the first quarter of 2022, showcasing Snap's first revenue decline since it went public.

Snap reported a net loss of $329 million, which narrowed from $360 million in the first quarter of 2022. The company's free cash flow was $103 million, representing a nearly 3% year-over-year decrease.

The company also fell one million users short of the expected daily active user count, according to StreetAccount.

However, the company still showed growth of 15% YoY from 332M to 383M daily active users -- which Snap CEO Evan Spiegel believes will help it to generate future revenue.

“We are working to accelerate our revenue growth and we are using this opportunity to make significant improvements to our advertising platform to help drive increased return on investment for our advertising partners,” Spiegel said in a statement.

Snap does not have the same global presence as rival tech giants Meta and Google to help withstand the challenges of a difficult digital ad market.

Meta withstood three consecutive quarters of diminishing sales and still reported 3% YoY growth, which CNBC linked to Chinese companies spending large sums of money on Facebook to show ads to people around the world.

Snap attributed its Q1 results to a “disrupted” demand for ads and Apple's privacy changes, which impacted the ways that advertisers could collect data and target ads.

Larger companies like Meta and Google are rebounding, but Snap is not alone. Ad revenue for YouTube dropped 3% in the first quarter.

Unlike YouTube, however, Snap's publicity has not been ideal in recent weeks. The launch of its “My AI” virtual chatbot has seen Snapchatters leaving a record amount of one-star reviews and threats of leaving the app altogether.

Originally touted as an engaging feature for Snapchat+ subscribers -- which recently hit a total of 3 million users -- My AI is now being called annoying and even dangerous in terms of violating user privacy.