(Bloomberg) -- Snap Inc. fell to its lowest level in more than two years after the company reported disappointing sales, roiled by a major slowdown in ad spending and rising competition for dwindling marketing dollars. Shares of Meta Platforms Inc. and Alphabet Inc. fell in tandem.

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Second-quarter revenue grew 13% to $1.11 billion, the company said Thursday, falling short of analysts’ expectations for $1.14 billion. Snap told investors in May to disregard its initial growth guidance, which the company ultimately missed.

Advertisers are slashing budgets more than expected -- a trend the company attributed to broad economic uncertainty. Snap makes the popular Snapchat app, which reached 347 million daily active users in the quarter. Its user growth outpaced rivals Facebook and Twitter and topped analysts’ estimates. But it wasn’t enough.

“The combination of macroeconomic headwinds, platform policy changes and increased competition have limited the growth of campaign budgets,” the company said in an investor letter Thursday. The results “do not reflect the scale of our ambition,” Snap added. “We are not satisfied with the results we are delivering, regardless of the current headwinds.”

Due to the economic uncertainty, the company didn’t issue financial guidance for the third quarter, except to say that -- this far into the period -- revenue is about flat compared with last year. In the second quarter, Snap posted a net loss of $422 million, more than the $332.7 million average estimate.

Snap shares plunged as much as 36% to $10.51 in New York on Friday morning, dragging shares of other social media companies with them. The stock had already fallen about 65% this year prior to the announcement. Snap management has told employees of plans to limit hires, and reiterated the strategy Thursday, saying it plans “a substantially reduced rate of hiring.”

What Bloomberg Intelligence Says:

“Snap appears likely to face worse-than-expected ad-pricing pressure, driven by a pullback in spending as well as Apple’s privacy changes. The company’s view of 3Q revenue being about flat year-over-year suggests its headwinds aren’t likely to abate in the near term.”

-- Mandeep Singh, BI senior technology industry analyst

Click here to read the research.

Investors will be watching Snap for clues on the performance of other advertising-dependent social media businesses. Twitter reported its second-quarter results on Friday and showed revenue declined 1% in the period, the first drop since the middle of the pandemic in 2020. The company cited “advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter,” as factors in the disappointing results. Meta and Alphabet also report earnings this month.

Snap, Meta-owned Facebook and Alphabet-owned Google are competing for advertising dollars at a challenging time. Spiraling inflation is putting pressure on companies and consumers’ spending. Meanwhile, new rules from Apple Inc. that require all apps to get a smartphone user’s permission to be tracked online have made it more difficult for advertisers to measure and manage their ad campaigns.

“We’re seeing the overall advertising pie grow at a smaller rate, and that essentially intensifies the competition,” Snap Chief Financial Officer Derek Andersen said on a call to analysts and investors Thursday.

Fast-growing competitor TikTok, with its endless feed of short-form videos, has been swiftly luring users and advertisers to its platform. It now has about 1 billion users in the US, who spend more time on the app monthly than they do on Instagram and Facebook combined, according to mobile researcher Data.ai. In response, Instagram, Facebook, YouTube and Snap have all added similar vertical-video feeds in response.

“The economy and these changes to Apple in particular have really accelerated a lot of the problems that were existing for a lot of these social media companies,” said Jasmine Enberg, principal analyst at Insider Intelligence. “The reality here is public behavior is shifting to more public sharing -- the TikTok-like short video entertainment. TikTok has really shaken up the social media world.”

To weather this environment, Chief Executive Officer Evan Spiegel is investing in three main priorities: initiatives that continue to grow its user base, improving its direct-response advertising business and how it measures ad spending, and finding new sources of revenue to diversify the company.

In the last quarter, the company rolled out a number of user-focused tools. Snapchat+ is a subscription service that allows power users to access “exclusive” and “experimental” features for $3.99 a month. Snapchat for Web was made available to users in certain markets, extending voice and video calling, and chat tools to desktops. The company also launched a $230 square-shaped flying camera drone that can automatically film the user and then land in the palm of their hand.

As part of its earnings announcement, the Santa Monica, California-based company’s board authorized a stock buyback program of as much as $500 million in the next 12 months to help offset the issuance of shares for employee compensation.

The board also authorized a stock split if the shares reach $40 in the next 10 years, which would let the co-founders to sell or donate shares. The move would award one additional share to holders of Class A shares, which is the nonvoting stock also traded by investors. This would permit the founders to hold their Class B and C shares, which allow the pair to control more than 99.5% of the company’s voting rights.

On Thursday, Snap said co-founders Spiegel and Bobby Murphy have entered into new agreements to serve in their roles -- CEO and chief technology officer, respectively -- until at least Jan. 1, 2027. The executives will be paid $1 a year and receive no equity compensation.

(Updates with stock trading.)

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