Daily Brief: Snap Didn’t Like Its Reflection Last Quarter, And Neither Did Investors

Daily Brief: Snap Didn’t Like Its Reflection Last Quarter, And Neither Did Investors

over 1 year ago3 mins

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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 Snap’s refusal to give guidance for the second-straight quarter, duly sent its stock plunging 27%.

Snap DAUs
Source: Snap

Why should I care?

For markets: Social contagion.

For the third quarter in a row, Snap’s 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. 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.

Snap stock
Source: Google Finance

Zooming out: Twitter teeters too.

Twitter’s another social media company whose stock dropped on Friday, but the blame for that can’t be pinned entirely on Snap. See, Twitter’s dip came on the back of reports that the US government is subjecting Elon Musk’s ventures – including his deal to buy Twitter – to national security reviews. This is the latest twist in a Musk-Twitter saga that’s beginning to seem like an M. Night Shyamalan film.

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Brits Aren’t Biting

UK retail sales image

Data out on Friday showed that UK retail sales fell more than expected in September.

What does this mean?

It’s blindingly obvious that inflation in the UK’s through the roof, but the latest data took even economists by surprise: British retail sales fell 1.4% in September compared to August, almost three times the expected 0.5%. Now, a drop that sharp normally has a couple of causes, and the most obvious is that folk are simply cutting back on expenses as prices rise. In fact, 41% of all motorists were avoiding non-essential journeys because of high fuel prices, and online shopping and food store sales were down 3% and almost 2% respectively in September. Store closures during the late Queen’s funeral played a role in those numbers too, but after August’s drop, these dips are starting to look like a trend. All in, sales volumes are languishing a whole 10% below their pre-pandemic rate.

UK retail sales

Why should I care?

For markets: Bad news for Brits.

The pound fell in the wake of the news, and economists said the data makes it more likely that the economy shrank last quarter. On top of that, separate data showed that UK consumer confidence – a measure of how Brits view their finances and the economy – continued to hover near 50-year lows at the start of this month. What’s more, all that data came in before the prime minister resigned last week, a move that’ll bring uncertainty and nervousness to fever pitch.

UK consumer confidence

The bigger picture: In the hole.

Whoever replaces the outgoing prime minister will inherit an unenviable job, especially when it comes to getting government finances in check. After all, the government deficit – that’s the difference between what it spends and what it brings in from things like taxes – was much higher than expected last month. The country’s been piling up debt to plug the gap, but with interest rates on the up, that solution’s looking pretty unsustainable.

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