Snap Inc. (“Snap”) is, once again, embattled by charges of violation of federal securities laws. The self-described “camera company,” whose main product is the well-known social media application “Snapchat,”is facing a securities class action lawsuit because of its alleged omissions and misrepresentation, to investors, about the effectiveness of its advertisements considering new privacy measures implemented by Apple Inc. (“Apple”). Over a year ago, Apple announced that it had plans to introduce new data privacy features for its users. In response to this announcement, Snap preemptively reassured its investors that the company would not be affected by this news. As months went by, Snap continued to mislead investors about the foreseeable impact of apple’s privacy features and set high expectations for its upcoming quarterly revenues. Earlier this year, as part of its IOS 14.5 update, and later, along with its launch of IOS 15, Apple delivered on its promise and released novel privacy features across its iPhone devices, which provided its mobile users with increased control over their data. Specifically, users can now “make informed decisions about whom they share [their data] with.”
The feature at the center of Snap’s dilemma is called App Tracking Transparency (ATT) and is a feature that asks users to give explicit consent to being tracked by the apps they install on their device. As part of the advertising wing of its business, Snapchat makes revenue by allowing third party partners and advertisers to show ads to users on its platform based on information collected on other websites and services. When users choose to opt out of sharing their usage data with applications such as Snapchat, they create difficulties for app developers who can no longer get a full scope of how users interact with ads. Furthermore, this decision poses key problems for advertisers who can no longer access the tailored information they need to show users targeted ads that would lead to purchases. Having been aware of this, Snap was overly optimistic about its ability to adjust its advertising systems in response to Apple’s privacy changes, according to investors. Shareholders are also alleging that Snap failed to disclose the possibility that its business would be materially impacted by the Apple privacy changes. At least, not until it was too late, and the damage had already been sustained, with the Snap stock falling more than 25% in October of this year. While the CEO of Snap recently admitted, on its earning call, that the company had “anticipated some degree of business disruption,” investors are accusing the company of downplaying the actual impact that was present and ongoing throughout the class period. Snap has also come under fire for inflating its actual commitment to user privacy.
Many security lawsuits may be on the horizon as companies who rely on user data for revenue try to adapt to more consumer-friendly privacy policies. Companies ought to be more careful when making, what might be deemed, “aspirational” statements so as not to be targeted by their shareholders for actions (and revenue) that may not squarely align with what they have guaranteed to investors.
Lowey Dannenberg has extensive experience litigation securities class actions on behalf of investors. If you have questions or would like to speak with a securities litigation attorney contact Andrea Farah (firstname.lastname@example.org) or Mitsuka Attys (email@example.com).
 Apple Press Release, Apple advances its privacy leadership with iOS 15, iPadOS 15, macOS Monterey, and watchOS 8 (June 7, 2021), https://www.apple.com/newsroom/2021/06/apple-advances-its-privacy-leadership-with-ios-15-ipados-15-macos-monterey-and-watchos-8/.
 Camomile Shumba, Social media company Snap falls as much as 23% after a blow to its Q3 earnings from Apple privacy changes and supply-chain disruption (October 22, 2021), https://markets.businessinsider.com/news/stocks/snap-stock-price-q3-apple-privacy-changes-advertising-facebook-pandemic-2021-10.