Stocks in social media companies are on the slide this Friday, dragging down the tech-heavy Nasdaq, after earnings from Snap and Twitter sounded the alarm bells for the ad-dependent sector.
Shares in the parent of the Snapchat app are currently down nearly 40 per cent after it reported that brands were slashing digital advertising budgets due to the wider economic slowdown and inflationary pressures. It was also being hit by privacy changes by Apple that have made it harder to target advertising and measure the success of campaigns.
It added that business had been hurt by increased competition as entrants such as Chinese-owned TikTok take market share. Net losses widened by 178 per cent compared with the same period last year to $422mn — far greater than analyst estimates of losses of $340mn. Snap declined to provide expectations for third-quarter revenues or earnings, citing “uncertainties related to the operating environment”.
Twitter blamed a slump in digital advertising spending and Elon Musk’s on-off pursuit of the social media company for a 1 per cent fall in second-quarter revenues to $1.18bn. It said the lacklustre results reflected “advertising industry headwinds associated with the macroenvironment, as well as uncertainty related to the pending acquisition”. The figures missed analyst expectations of a rise in revenues to $1.3bn.
Meta shares are down more than 7 per cent, with investors concerned it will report a similarly bleak picture on advertising spending when it reveals quarterly results next Wednesday. Ahead of those, it has been tinkering with its newsfeed on Facebook and taking steps to bulk up its content on Instagram (see Tech Tools below) in order to combat the rise of TikTok.
The Internet of (Five) Things
1. Amazon to add ads share
On that competition mentioned by Snap: Amazon is becoming a bigger player, lying third to Meta and Alphabet with its share of the digital ads market expected to reach almost 15 per cent by next year. Lex says Amazon has a couple of advantages over both companies: a captive audience of businesses to buy ads as well as detailed first party data with which to tailor them.
2. Airbnb hires lobby expert Carney from Amazon
Former White House press secretary Jay Carney has joined Airbnb to head policy and communications, following a seven-year stint at Amazon where he led the lobbying and media relations team. His move to Amazon in 2015 — in a role reporting directly to Jeff Bezos — came after the ecommerce giant had doubled spending on lobbying in the prior three years.
3. BT-Warner deal approved
Britain’s competition watchdog has approved the merger of the sports broadcasting businesses of BT Group and Warner Bros Discovery. FT reporters have been talking to the new chief executive of DAZN about its plans. The sports streamer has been licking its wounds after the collapse of its own bid to acquire BT Sport, which screens English Premier League and Uefa Champions League football matches in the UK.
4. Coinbase insider trading charges
US prosecutors have charged a former Coinbase employee and two associates with insider trading in the latest sign of how authorities are stepping up enforcement in the digital asset industry. Ishan Wahi, 32, was charged with sharing with his brother and friend tips on digital tokens that were due to be listed on Coinbase.
5. The geopolitics of chips
We have a new geopolitics, according to the chief executive of Intel. In her column, Gillian Tett says Pat Gelsinger believes computer chips are the strategic version of the fossil fuel for the 21st century. He sees the location of fabs (chip fabrication factories) shaping the geopolitics of the next five decades much as oil has in the past five.
Tech tools — Meta’s new feeds and Reels
Meta has announced over the past couple of days significant changes to the way users can interact and create with Facebook and Instagram as it counters the threat from short-form video app TikTok. On Instagram, the Reels product, which it introduced in 2020 to mimic TikTok’s short videos, is being supercharged with new templates, a Dual feature that incorporates front and rear cameras, along with a major bulking up of its content. In future, all new videos shorter than 15 minutes that users post publicly will be shared as reels and could be recommended by Instagram’s algorithms to other users.
Meta is also trying to get you more hooked with its algorithms on Facebook. On its iOS and Android apps, the main newsfeed is being split into two tabs for Home and Feeds. The default Home is being made more of “a discovery engine” for a wide range of content based on algorithm recommendations. The Feeds tab will give “an easy way to access the content from the people and communities you’re already connected with on Facebook”. The one thing about Feeds that users are likely to appreciate the most is that all of their friends’ and groups’ posts will appear in chronological order rather than the current jumble determined by Facebook.
