Shulou(Shulou.com)11/24 Report--

According to news on the evening of February 1, Beijing time, Mark Shmulik, an analyst at Bernstein, an investment bank, said today that Snap, the parent company of photo-sharing app Snapchat, turned profitable to loss in the fourth quarter of last year, but its "direct response" (direct response) advertising business performed well, which could be good news for Google's parent company Alphabet and Facebook parent company Meta.

Earlier today, Snap released its fourth-quarter 2022 results. Revenue was $1.3 billion (currently about 8.788 billion yuan), up 0.1 per cent from a year earlier. The net loss was $288 million (currently about 1.947 billion yuan), compared with a net profit of $22.6 million in the same period last year. Excluding GAAP, adjusted net profit was $215 million, compared with $359 million a year earlier.

Snap blamed the lacklustre quarterly earnings on a poor economy and increasingly fierce market competition. But the rise in "direct response", a key advertising indicator, could be good news for Alphabet and Meta, said Shmulick, an analyst at Bernstein.

The so-called "direct response" advertisement means that users can download an application directly or shop in a web browser after clicking on the ad. Snap's "direct response" advertising business grew 4 per cent in the fourth quarter from a year earlier. By contrast, brand advertising revenue fell 11 per cent year-on-year.

Mr Shmulick believes this could be a boon for Meta and Alphabet, whose business has been deployed and optimized for "direct response" advertisers.

Currently, Google, owned by Alphabet, is the world's largest digital advertising platform. Compared with other companies that rely on advertising, Google has always been the biggest beneficiary. Because brands believe that advertising on Google search is crucial to driving site visits or other consumer behavior.

Similarly, Meta said in previous quarters that most of its revenue came from "direct response" advertising. Meta's Facebook and Instagram have billions of users, making them a key part of many brand marketing strategies.

"Snap is affected by the fact that it is mainly brand advertising, which has been hit far more than 'direct response' advertising," said Mark Mahaney, an analyst at Evercore ISI, an investment bank. "the impact on Meta and Google is less severe."

Snap expects revenue to fall by up to 10 per cent in the first quarter of 2023 compared with the same period a year earlier. As a result, Snap shares closed down 14% on Tuesday. Snap shares fell as much as 15 per cent in pre-market trading today.

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