Snap Back To Reality

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What's going on?

Social media company Snap reported its slowest quarterly sales growth ever late last week.

What does this mean?

Once the darling of teenagers everywhere, Snap spent most of last quarter in a tailspin shedding workers and unpromising projects with a kind of desperate, flailing abandon. And while some metrics did point upward (daily active users increased by a better-than-expected 19%), most were pretty damning: US users, for instance, spent 5% less time watching content on its platform than this time last year likely lured away by TikTok, the hipper new kid on the block. And with advertisers slashing budgets anyway, that bad news comes at a particularly tricky time. That could explain why the average revenue per user fell a disappointing 11%, and why overall revenue grew by a tepid 6%. Investors, spooked by those figures and by Snaps refusal to give guidance for the second-straight quarter, duly sent its stock plunging 27%.

Why should I care?

For markets: Social contagion.
For the third quarter in a row, Snaps disappointing results have made investors skittish about social media stocks as a whole.The firm’s quarterly report caused shares in companies like Meta, Alphabet, and Pinterest to lose a combined market value of $42 billion, as investors worry those ad-reliant platforms could go the way of Snap (tweet this). Things might not be as bad for them though: some analysts reckon picky advertisers might just be shifting their smaller budget allocations to the most efficient and proven platforms, like Facebook and Google.

Zooming out: Twitter teeters too.
Twitters another social media company whose stock dropped on Friday, but the blame for that cant be pinned entirely on Snap. See, Twitters dip came on the back of reports that the US government is subjecting Elon Musks ventures including his deal to buy Twitter to national security reviews. This is the latest twist in a Musk-Twitter saga thats beginning to seem like an M. Night Shyamalan film.

Originally posted as part of the Finimize daily email.

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