The news: Snapchat owner Snap Inc. issued a warning to investors this week that it will not meet its revenue projections for the current quarter, sending its stock into a freefall and stirring concerns about the state of digital advertising overall.
Industry concerns: The issues cited in Snap’s warning—inflation, the war in Ukraine, supply chain shortages, and rising interest rates—don’t only apply to Snap but to the entire social media and digital ad industry, which is still recovering from changes to Apple’s Identifier For Advertisers and coping with ad tracking regulations.
Analyst take: “Headwinds are turning into gale force winds for the social platforms,” said Jasmine Enberg, principal analyst at Insider Intelligence. “A perfect storm [is] heading straight for their ad businesses. While a slowdown was to be expected after the pandemic-induced gains last year, Snap isn’t likely to be the only social platform to struggle to meet its expectations for Q2.”
No immunity: Like other social media apps, Snapchat has bet on in-app shopping and social commerce to boost revenues. But this week’s warning and other stiff competition could be a sign that Snap’s unique features aren’t enough to help it avoid a digital ad slump.
The big takeaway: Snapchat’s warning is a warning for the entire social media industry, whose reliance on ad revenues amid difficulty pivoting to subscriptions have left it vulnerable to unstable economic conditions and industry-wide changes.