The earnings details posted by Snap were disappointing enough to cause a plunge in stocks of Facebook, Twitter, and other social media companies.
The stocks’ prices of some social media companies, including Facebook Inc (NASDAQ: FB) and Twitter Inc (NASDAQ: TWTR), and digital advertising companies slumped during after-hours trading, after Snap Inc (NYSE: SNAP) reported missed revenue expectations for the third quarter. Furthermore, Snap identified iPhone privacy changes as a disrupting factor to its advertising business. In addition, Snap also warned of supply chain disruptions suppressing advertising short-term spending. This is because companies are not keen on ramping up demand for products they may not be able to supply.
Social Media Stocks
Social media giants Facebook and Twitter shed 6% and 5% of their stocks respectively during after-hours, ahead of earnings reports scheduled for next week. In addition, Google’s parent company, Alphabet Inc (NASDAQ: GOOGL), and image-sharing social media service Pinterest Inc (NYSE: PINS) also dropped 2%. It is also worth noting that the latter dipped by over 2% during regular trading too. This was after reports surfaced that payment platform PayPal Holdings Inc (NASDAQ:PYPL) was interested in an acquisition.
Furthermore, digital advertising companies that leverage customer data also experienced stock dips too. For instance, The Trade Desk, and Magnite each saw a drop exceeding 5%. In addition, Liveramp sustained a drop of more than 3% during after hours.
Snap posted a revenue of $1.067 billion for the third quarter, which represents a 57% increase from a year ago. However, this figure fell below the company’s guidance range of between $1.07 billion and $1.085 billion. Furthermore, Adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, was $174 million. This proved to be well above its guidance range of between $110 million and $120 million. The company said it grew daily average users in the quarter by more than 20% to 306 million.
ATT Feature, Issue with Online Advertisers
Various technology companies have been at odds with Apple’s App Tracking Transparency privacy change. This feature asks users through a pop-up whether they want to opt-in for tracking. Back in April, the tech behemoth stated that it would start enforcing this privacy change in its products. The company also said it would begin removing apps that refuse to comply with the new policy. Finally, Apple declared that all apps submitted beyond a week of the announcement should be ATT-support friendly.
However, some online and media companies such as Facebook are worried about this. The companies argue that institutionalizing the privacy change will reduce the effectiveness and profitability of targeted ads. In addition, this could also potentially agitate the online advertising business, they explain. Critics also buttress this opinion by stating that the privacy change makes it much harder for advertisers to track digital-ad effectiveness.
Snap CEO Evan Spiegel addressed the situation in an issued statement.
“While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS,” said he.
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