The news: Snap reported lower-than-expected revenues for Q1, hurt by softer ad spending. Key figures include:

• Revenues were $989 million, falling short of the expected $1.01 billion from Refinitiv and a 7% decline from Q1 2022.
• 383 million global daily active users, slightly below the expected 384 million, as per StreetAccount.
• Average revenue per user of $2.58, less than the expected $2.63, according to StreetAccount.
• One bright spot: Net loss narrowed to $328.7 million, better than the $348 million analyst expectation and last year’s $359.6 million loss.

The company's shares fell up to 20% in after-hours trading on Thursday due to these disappointing results, only to rebound somewhat but remain down.

Looking ahead: Snap didn't provide official guidance but mentioned in its shareholder letter that its internal forecast for Q2 revenue is $1.04 billion, a 6% year-over-year decline. Analysts had Q2 sales projections of $1.10 billion.

• It’s worth noting that over the past year, Snap has been less accurate with guidance than many other digital advertising players.

Analyst insight: “Snapchat isn’t a textbook ad-supported platform: Snapchat users primarily use the app for messaging, and messaging apps are notoriously difficult to monetize,” said principal analyst Jasmine Enberg. “Snap’s strong association with augmented reality, Apple’s privacy changes, and Snapchat’s small size relative to the social platforms that advertisers bucket the app with have created additional headwinds to its ad business.”

Our take: Social media companies have been hit hard as advertisers consolidate spending in a cautious environment. That’s had an effect on smaller players like Snap. Last year, Snapchat accounted for 3.2% of all social network ad revenues, per our forecast; by 2025, that will have dropped to 2.9%.

• Snap’s saving grace: The app is popular with younger, highly coveted consumers. If the platform’s demographics were inversed and it overindexed with older users, the company would be even more of a niche player—if that.