Snapchat's Tumultuous Times: Lawsuits, AI Controversy, and a Fight for Ad Revenue
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Snapchat's Tumultuous Times: Lawsuits, AI Controversy, and a Fight for Ad Revenue
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Snapchat is feeling the heat after a turbulent few days that have seen headlines, lawsuits, and power moves at the highest levels. On August 5, Snap Inc. disappointed Wall Street with its Q2 2025 financials, revealing a sudden slowdown in advertising revenue growth, plummeting from 9 percent growth in Q1 to a paltry 1 percent by April. In response, big-name law firms Pomerantz LLP and Levi and Korsinsky have both filed class action lawsuits, alleging the company misled investors about its true revenue predicament. Snapchat’s share price tumbled over 17 percent in a single day, from $9.39 to $7.78—not exactly the energy you want heading into the fall, and prompting Bank of America to trim its price target yet again, from $10 to $9.50, while reiterating a ‘neutral’ rating.
While investors were left reeling, Snapchat’s business team moved to shore up the ad business by doubling down on direct response advertising. According to WARC, direct response grew 16 percent as more small and mid-sized businesses flocked to affordable, measurable campaigns. The number of advertisers on snap doubled year-on-year in Q3 2024, and CEO Evan Spiegel insists that new ad formats, including sponsored Snaps, are designed to refuel the brand advertising segment that’s been losing steam.
Behind the scenes, Snap is also making organizational power plays. Data Center Knowledge just revealed the company has poached Jerry Hunter, former global head of Amazon’s data centers, signaling a serious escalation in Snap’s AI and infrastructure ambitions. And on the AI front, Snap is once again attracting criticism from privacy activists and digital rights organizations. The Campaign for a Commercial-Free Childhood called out Snapchat for quietly introducing a setting that allows the company to use public user content—including images, video, audio, and text—for generative AI training, with the default set to opt-in and minimal notice to users. Critics argue that the design targets teens and young adults, exploiting peer pressure and FOMO to drive public sharing—the latest flashpoint in the techlash over exploitation of young users.
On the safety beat, Snap’s own newsroom touted the expansion of its Council for Digital Well-Being into Europe and Australia, inviting teens to advise on digital life and online safety—a move that contrasts sharply with the lawsuits and regulatory scrutiny. Social media mentions have been split between investor drama and Snap’s partnership as a headlining sponsor for Smarties Unplugged India 2025, with Instagram lighting up with congratulations for the brand’s continued global presence. As summer turns, all eyes are on Snap’s next moves, the lawsuits, and whether its bets on AI and new ad formats can win back investor confidence—or just fuel the next controversy.
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