Snap sets off alarm bells in ad-reliant social media sector

Must read

Elon Musk’s Twitter says it has good reason not to pay for $200,000 private jet trip: The company overbilled us

Twitter Inc. fired back at a private jet provider that sued over unpaid bills, saying the company overcharged for the social media giant’s head...

Elon Musk’s false ‘funding secured’ tweet caused Tesla investors ‘consequential harm’ to the tune of $12 billion, jury told

Tesla investors lost $12 billion over 10 days as a result of Elon Musk’s famous tweet in 2018 that he had “funding secured” to...

Governments need to work with the private sector to solve their trust crisis

Democracies everywhere are experiencing a trust crisis. Polling by the global public relations firm Edelman shows that from 2021 to 2023...

Air travelers would get $1,350 if bumped under proposed ‘passenger bill of rights’ that comes just weeks after Southwest Airlines’ epic meltdown

Senators who want to impose tougher penalties when U.S. airlines strand or delay passengers say they finally might be able to turn their ideas...

Snap sets off alarm bells in ad-reliant social media sector © Reuters. FILE PHOTO: A woman stands in front of the logo of Snap Inc on the floor of the New York Stock Exchange (NYSE) in New York City, NY, U.S. March 2, 2017. REUTERS/Lucas Jackson

By Nivedita Balu and Akash Sriram

(Reuters) – Snap Inc (NYSE:) shares sank more than 30% on Friday and hit their lowest since the pandemic, after the company’s forecast of zero revenue growth pointed to more pain ahead for a social media sector heavily dependant on digital advertising.

Facebook-parent Meta Platform Inc and Pinterest (NYSE:) Inc fell between 2% and 7%. Twitter Inc (NYSE:) slid 3%, also dragged by fears of security reviews of billionaire Elon Musk’s takeover bid.

Analysts rushed to cut their price target on Snap, with Morgan Stanley (NYSE:) taking it to a Wall Street low of $7. In early trading the stock hit its lowest since early 2019.

GRAPHIC – Social media stocks slip as advertiser spending slows

https://graphics.reuters.com/SOCIAL%20MEDIA-STOCKS/egpbynkxevq/Pasted%20image%201666341773881.png

The digital ad space has suffered as brands have cut marketing and ad budgets in response to declining consumer demand. Snap’s warning exacerbated those fears.

“This truly is a cautionary tale … advertisers might show that we’re already in a recession because of their unwillingness to spend on these smaller platforms,” said Bokeh Capital Partners’ Kim Forrest.

So far this year, digital ad companies have together lost roughly $1 trillion in value, hit by intense competition from TikTok and challenges from Apple Inc (NASDAQ:)’s privacy changes to its iOS platform that allows users to opt out of data tracking.

Snap reported its slowest revenue growth as a public company for the latest quarter on Thursday, and forecast no revenue growth for the typically busy holiday quarter.

GRAPHIC – Snap warns of more trouble ahead as digital ad budgets fall

https://graphics.reuters.com/SNAP-RESULTS/movakmnxeva/chart.png

SNAP’S WOES

Advertisers have relied on Snap’s platform to tap into its popularity among teens and young adults.

But Apple’s privacy changes have made it more difficult to track and measure ads on Snapchat, causing major brands to shift their ad spending to bigger platforms that reach more people.

“A challenged macro continues to see ad buyers prioritize their larger, core platforms, namely Google and Meta, as they monitor consumer health,” Bernstein analyst Mark Shmulik said, adding that ad buyers reducing their spend particularly on smaller experimental platforms.

Snap’s stock has lost about 77% of its value so far this year, while Alphabet (NASDAQ:), Meta and Pinterest have lost between 30% and 60%. Twitter, however, has gained 21% on the prospect of billionaire Musk buying the company.

“We now believe that Snap will have difficulty remaining under control of its own destiny over the next six to nine months,” MKM Partners analyst Rohit Kulkarni said.

More articles

Latest article

Elon Musk’s Twitter says it has good reason not to pay for $200,000 private jet trip: The company overbilled us

Twitter Inc. fired back at a private jet provider that sued over unpaid bills, saying the company overcharged for the social media giant’s head...

Elon Musk’s false ‘funding secured’ tweet caused Tesla investors ‘consequential harm’ to the tune of $12 billion, jury told

Tesla investors lost $12 billion over 10 days as a result of Elon Musk’s famous tweet in 2018 that he had “funding secured” to...

Governments need to work with the private sector to solve their trust crisis

Democracies everywhere are experiencing a trust crisis. Polling by the global public relations firm Edelman shows that from 2021 to 2023...

Air travelers would get $1,350 if bumped under proposed ‘passenger bill of rights’ that comes just weeks after Southwest Airlines’ epic meltdown

Senators who want to impose tougher penalties when U.S. airlines strand or delay passengers say they finally might be able to turn their ideas...

How the airline industry is using A.I. to improve the entire experience of flying

When Swiss International Air Lines began to use A.I. technology to boost efficiency, the carrier was able to better optimize more than half the...