Social media has had a rough 2022 with lingering questions about advertising spend, political ads, and a $44 billion Twitter takeover that may or may not happen, depending on which Elon Musk tweet you read.
At the end of Monday, Snap issued a rather serious profit warning, saying that “the macroeconomic environment has deteriorated further and faster than expected since last month.”
All social media are competing for advertising money, which is increasingly threatened by rising inflation and changes at Apple Inc. that can limit the information social media platforms collect about users, a key selling point for advertisers.
Shares of Snap Inc, which runs the Snapchat app with disappearing messages and special video effects, plunged 40% on the opening bell on Tuesday.
And while Wall Street isn’t sure if the company is an outlier or a canary in the social media coal mine, shares of Facebook parent Meta Platforms, Twitter, and Alphabet all fell short of it.
If early declines hold, the collective could wipe more than $100 billion off the books in an industry already under pressure.
Snap said late Monday that it anticipates earnings and adjusted earnings before interest, taxes, depreciation, and amortization to fall below the lower end of its previous forecast range.
Justin Patterson of KeyBanc Capital Markets, who follows social media, warned investors not to read too much into Snap’s earnings warning, calling it “a flag of warning, but not one to sound the alarm across the industry.”
“We believe it is better to look at 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 of the macro environment,” Patterson wrote.
The volatility comes in a week when both Meta Platforms and Twitter are holding their annual meetings with shareholders, focusing particularly on what could be a lively gathering for Twitter. Elon Musk has pressed the pause button on the buyout and says he needs more information about how many “spam bots” the social media platform really has.
A note from Dan Ives, who follows social media at Wedbush, sums up the confusion.
“We think there is currently a 60% chance that Musk is trying to use this spam account problem as a scapegoat to get out of the deal and a 40% chance that the Twitter and Musk boards will come to a new deal price in the coming weeks. coming,” he wrote in a note to customers.
Twitter’s share fell more than 3% when the market opened.
Adding to the social media tumult is Facebook’s parent company, Meta. The company said it will publicly release more details about how advertisers target people with political ads just months before the US midterm elections.
Meta is particularly sensitive to the changes made at Apple and is now facing a civil lawsuit against its chief, Mark Zuckerberg. On Monday, the District of Columbia sued Zuckerberg to hold him personally liable for the Cambridge Analytica scandal, a privacy violation of millions of Facebook users’ personal data that became a major corporate and political scandal.
Shares of Meta Platforms Inc. fell more than any other company at the opening bell Tuesday by nearly 8%.
Alphabet Inc., the parent company of Google, fell by 6%.