Twitter and Snapchat reports send shares sliding for social media giants  

At current prices Pinterest, Meta, Twitter, Alphabet and Snap were collectively set to lose about $42bn (€41.1bn) in market value.

Shares of social media firms fell sharply after Twitter and Snapchat's owner Snap signalled that advertisers had tightened their purse strings in response to a darkening economic outlook.

Pinterest plunged over 11%, Facebook-owner Meta Platforms 5.5%, and Google-owner Alphabet, which also sells ads online, fell 3.3%. At current prices Pinterest, Meta, Twitter, Alphabet and Snap were collectively set to lose about $42bn (€41.1bn) in market value.

Twitter also blamed its ongoing battle to close its $44bn (€43.1bn) acquisition by Elon Musk for the surprise fall in quarterly revenue. 

Advertisers have pared back spending amid rising interest rates and surging inflation as some of them struggle with labour shortages and supply chain disruptions, Snap said. 

"If you want proof that companies are nervous about the economic outlook, just look at how media platforms and marketing agencies are bemoaning a tougher advertising market," Russ Mould, AJ Bell investment director, said.

Investors are bracing for the slowest global revenue growth in the history of the social media sector as Apple's privacy changes further cloud outlook. 

Snap's shares were down 36% and were the most heavily traded across US exchanges, as the company said it was looking for new sources of revenue to grow. "Unfortunately for Snap and the digital ad sector, we believe there are signs of further ad spending cuts," RBC Capital Markets said. 

Attention now turns to quarterly reports from mega-cap firms Meta and Google-owner Alphabet next week. Some analysts believe the drop in their share prices reflects what is likely to be a subdued report.

"While more revenue cuts for advertising stocks are likely, we think Alphabet has more relative revenue stability given breadth of advertisers, more expense flexibility than most peers," analysts at Bank of American Global Research said.

Twitter said that “advertising industry headwinds associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter” were factors in the disappointing results.

Twitter added 8.8 million new users during the quarter, in line with analysts’ estimates. It’s unclear how much Friday’s earnings report truly means to investors while the company’s fate remains in limbo. 

Reuters and Bloomberg