Snap Back to Reality: How Social Media is Scrambling for Footing

Social Media Stumble

Once high-flying social media stocks are struggling to overcome numerous headwinds that have eroded their bottom lines. Snap (SNAP), the parent of the popular instant messaging and photo app Snapchat, has been hit particularly hard. Its share price was hammered last week after it posted its worst quarterly sales growth ever and a net loss of $422 million.

The company is being affected by cutbacks in advertising spending due to inflation. Apple’s (AAPL) 2021 privacy policy changes also diminished the value of online marketing. Increasing competition chasing fewer ad dollars have generally put pressure on companies operating in the space.

Twitter Spat

Twitter (TWTR) has faced similar challenges. Its lawsuit against Tesla (TSLA) chief Elon Musk has transformed the current social media headache into a migraine. The company has experienced a drop in revenue compared to the previous year, which it blames in part on the uncertain outcome of its fight with Musk.

The social media company has shelved its goals and announced it won’t issue forward-looking guidance pending resolution of the legal action. Its case against the billionaire will be tried in October.

Meta’s Facelift

Facebook parent Meta Platforms (META) has seen its valuation plummet this year as it too struggles with the rocky social media landscape. In response, it is exploring new ways to support revenue growth. To this end, last week it introduced a new Feeds tab to the platform’s iOS and Android versions. The goal is to ensure users won’t miss their friends’ posts. In part, the new design copies that of archrival TikTok.

Social media fans can expect to see changes to their favorite platforms, like special features available for subscribers only. Companies know they need to keep users’ attention and rebuild their bottom lines.

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