Snap Inc. reported disappointing revenue in the holiday quarter as the company continues to reel from a slump in the digital advertising market. The shares tumbled almost 30 per cent in extended trading.

In the fourth quarter, revenue increased 5 per cent to US$1.36 billion, missing analysts’ projection of $1.38 billion. For the full year, revenue growth was flat, according to a statement Tuesday.

Chief Executive Officer Evan Spiegel has been leading the company through a broad restructuring over the past two years, cutting jobs and ending projects that don’t boost revenue or user growth. On Monday, the Santa Monica, California-based company said it’s cutting its workforce by an additional 10 per cent this year in an effort to reduce hierarchy and promote in-person collaboration.

Amid a slump in the digital advertising market, Snap has overhauled its core business to improve ad targeting and measuring its effectiveness, while also increasing its direct-response advertising offerings.

“2023 was a pivotal year for Snap, as we transformed our advertising business and continued to expand our global community,” Spiegel said in the statement. “Snapchat enhances relationships with friends, family, and the world, and this unique value proposition has provided a strong foundation to build our business for long-term growth.”

The parent company of the popular Snapchat app projected revenue of $1.10 billion to $1.14 billion in the first quarter, up as much as 15 per cent from a year earlier. The pace of growth is in line with analysts’ average estimates, according to data compiled by Bloomberg. 

Snap and Meta Platforms Inc. were badly affected by changes Apple Inc. made in 2021 to its privacy, which made it harder for advertisers to track users. Meta has bounced back, posting a 25 per cent gain in sales in the fourth quarter, its biggest quarterly increase in two years, while Snap is still recovering.

Meanwhile, Snap has tried adding new revenue streams to varying degrees of success. Its subscription offering, Snapchat+, has already amassed 7 million paying users with an annualized revenue run rate of $249 million – a unique feat among social media companies that have mostly failed to monetize subscribers. But its efforts to build augmented reality offerings for retailers was deemed too complex and shuttered last year.

Snapchat had 414 million daily active users in the fourth quarter, up 10 per cent from the same period last year. Almost half of those are in established markets like North America and Europe — regions the company says it will now prioritize. It’s a notable pivot for Snap, which has spent years committing resources to building support for Android phones in emerging markets.

“We are shifting more of our focus toward user growth and deepening engagement in our most highly monetizable geographies,” the company said in a letter to investors. “Focusing on these initiatives will help us increase daily active usage of Snapchat, deepen content engagement, improve performance for advertisers, and ultimately accelerate revenue growth and drive increased free cash flow.”

More than 800 million people use the app globally every month, the company said.

In the fourth quarter, Snap posted a net loss of $248.7 million, compared with a loss of $287.6 million a year ago and less than the $287 million average analyst estimate. Earnings per share were 8 cents, compared with analyst estimates of 6 cents. 

But, despite the recent round of job cuts, Snap projected a loss in adjusted earnings before interest, tax, depreciation and amortization of $55 million to $95 million in the first quarter, far beyond the loss of $33 million analysts’ were expecting.