Social Media Hammered by Questions Over Advertising
SSocial media had a tough 2022, with questions surrounding advertising spend, political ads, as well as a possible $44billion takeover of Twitter. It all depends on the tweet by Elon Musk.
Then late Monday Snap, which runs the Snapchat app that features vanishing messages and video special effects, issued a rather dire profit warning, saying that “the macroeconomic environment has deteriorated further and faster than anticipated,” since just last month.
Advertisers are keen to compete for this same advertising pool. This is due in part to spiking inflation, as well as changes at Apple Inc. which can limit the amount of information that social media platforms collect about users.
Snap Inc. shares plunged 40% Tuesday morning at the open bell.
Wall Street remains unsure about whether this company is an exception or a common thread in social media. As a result, the shares of Meta Platforms (Facebook parent), Twitter, Alphabet, Pinterest and Alphabet all fell with the company.
It is possible that early declines will continue, which could result in more than $100 Billion being wiped off collectively by a sector already suffering.
Snap reported late Monday that revenue and adjusted earnings after interest, taxes and amortization are now below their prior range.
Justin Patterson of KeyBanc Capital Markets who follows social media warned investors not to read too much into Snap’s profit warning, calling it “a cautionary flag but not one to sound the alarm on the entire sector.”
“We believe it is better to view each channel in the context of the nature of advertisers and verticals, guidance history, revenue growth vectors, and investments to assess the level of risk to revenue and profitability from the macro environment,” Patterson wrote.
Continue reading: Elon Musk’s ‘Free Speech’ Twitter Risks Scaring Off Advertisers
It comes as both Meta Platforms’ annual shareholder meetings and Twitter’s own meeting with shareholders are taking place. The focus is on the potential for a very lively Twitter gathering. Elon Musk has hit the pause button on the buyout, saying he needs more information on how many “spam bots” the social media platform truly has.
This is a summary of the confusion from Dan Ives who, at Wedbush follows social media.
“We believe its currently a 60% chance that Musk tries to walk and use this spam account issue as the scapegoat to get out of the deal and a 40% chance Twitter’s board and Musk come to a new deal price over the coming weeks,” he wrote in a note to clients.
Twitter’s stock fell more 3% when the market opened.
Adding to the social media tumult is Facebook’s parent company Meta. Just months before the U.S. midterm elections, Meta announced that it would start making public more information about advertisers targeting people through political ads.
Meta, which is sensitive to Apple’s changes is currently facing a civil suit against Mark Zuckerberg. On Monday the District of Columbia sued Zuckerberg, seeking to hold him personally liable for the Cambridge Analytica scandal, a privacy breach of millions of Facebook users’ personal data that became a major corporate and political scandal.
Meta Platforms Inc. shares fell almost 8% at Tuesday’s opening bell.
Alphabet Inc. (parent company to Google) plunged by 6% Pinterest Inc. shares fell by 24%
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