In Snapchat stock news, SNAP crashed 25% after reporting its Q2 earnings and warning investors about several headwinds that are facing Snapchat. These hadwinds could continue to negatively impact SNAP stock if company earnings continue to disappoint. Many investors are wondering if Snapchat's earnings warning to investors will affect other social media stock as well like Meta, Pinterest, and Twitter. To answer that question, we will dive more into what Snapchat pointed to as the headwinds it's facing.
The first issue SNAP pointed to is that platform policy changes have disrupted its advertising business. This in large part was a reference to the Apple iOS privacy changes last year that limited the ability of social media companies like SNAP to target and measure ads to users. This blow to ad targeting and being able to measure advertising effectiveness has caused some advertisers to divert ad spend from platforms like Snapchat since now the advertising is less effective. Companies are no longer able to as easily target their advertising to their ideal target customer, making Snapchat's advertising business less desirable for marketers and weighing on revenue.
The second issue Snapchat called out as a headwind for SNAP’s earnings going forward is the increased competition that the company is facing. Apple and TikTok have been making big headway into the advertising space this year and have hurt Snapchat's business. Apple and TikTok are expected to capture 34% of every new ad dollar outside of China this year. This growing competition in the digital marketing space is pressuring SNAP's business and ability to generate revenue since there are more platforms that are capturing ad dollars that may have previously gone to the company.
The third thing the company pointed to as a headwind was that macroeconomic challenges have disrupted many of the businesses that advertise with Snapchat. Since many of the companies that advertise with Snapchat have businesses that are currently suffering from a slowing and disrupted economy, they have less money to spend in their marketing budgets on Snapchat advertising and have been lowering their advertising bids. This in turn has hurt SNAP’s earnings and revenue outlook and SNAP stock.
These issues Snap is facing in its earnings are general industry trends as other companies like Meta, Pinterest, and Twitter all have to deal with the iOS privacy changes limiting ad targeting. The additional competition from Apple and TikTok in ad budgets are also something that will likely take money away from advertising dollars being devoted to platforms like Facebook, Instagram, Pinterest, and Twitter. And all companies are exposed to changes in the macro-economic outlook and the possibility of slowing consumer demand. So the headwinds facing Snap’s stock also look like they could easily weigh on other stocks like Meta, Pinterest, and Twitter.
Because of these problems, Snapchat signaled they are looking to introduce some future business changes to get the company back on track. These include efforts to develop their own data tracking and attribution to try and replace the lost functionality from iOS privacy changes. They are also working on developing new revenue generating opportunities like augmented reality focused advertising capabilities to drive revenue growth. The company also released Snapchat+ as a subscription service which is a way for Snapchat users to access exclusive, experimental, and pre-release features for $3.99 per month.
It remains to be seen if SNAP stock can recover from crashing 25% any time soon. A SNAP stock forecast is difficult at this time with the volatility, but the headwinds might lead to SNAP stock going down further in the near term.
Timestamps:
0:00 SNAP Stock crashes on Q2 earnings
1:24 Apple's iOS Changes Hurt Snapchat's Ad Business
2:20 Increased Competition for Snapchat
4:07 Macroeconomic Headwinds for SNAP and its Customers
4:46 How SNAP's Warning Affects Other Social Media Stocks
Disclaimer: Opinions expressed in this video are my personal opinion and are for information and entertainment purposes only. It is not intended to be investment advice and you are responsible for doing research and making your own investment decisions. Seek a licensed professional for investment advice.
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