Happy Nice Mall

Social media has had a tough 2022 with longstanding questions about ad spending, political advertising, and a $44 billion takeover of Twitter, depending on which Elon Musk tweet you read.

Then, late on Monday, Snap, which runs its Snapchat app with disappearing messages and video special effects, issued a pretty serious profit warning saying that “the macroeconomic environment has deteriorated more and faster than expected” since last month.

Social media companies are competing for the same pool of advertising money threatened by rising inflation, and changes at Apple Inc. that can restrict the information social media platforms can collect about users are a big selling point for advertisers.

Shares of Snap Inc. fell 40% on the opening bell on Tuesday.

And shares of Facebook’s parent company Meta Platforms, Twitter, Alphabet, and Pinterest fell with it, as Wall Street wasn’t sure if the company was an outlier or a canary in the company’s coal mine on social media.

If the early declines continue, it could collectively wipe more than $100 billion off the record in an industry that is already under pressure.

Late on Monday, Snap said it now expects income before interest, taxes, depreciation and depreciation and adjusted earnings to come below the lower end of its previously predicted range.

Justin Patterson of KeyBanc Capital Markets, a social media watchdog, warned investors not to read too much of Snap’s profit alert, calling it “a warning sign, but not an alarming sign for the entire industry.”

“We believe it is better to view each channel in the context of the nature of advertisers and verticals, their history of guidance, revenue growth vectors and investments to assess the level of risk on revenue and profitability from the macro environment,” Patterson said.

The volatility comes in a week when both Meta Platforms and Twitter hold their annual meeting with shareholders with a particularly heavy focus on what a live meeting could be for Twitter. Elon Musk pressed the pause button during the purchase, saying he needed more information about how many “spam bots” the social media platform actually has.

A note from social media follower Dan Ives at Wedbush sums up the confusion.

“We currently believe there is a 60% chance that Musk will try and use this spam account issue as a scapegoat to get out of the deal, and a 40% chance that the Twitter board and Musk will reach a new deal price in the coming weeks.” Wrote a note to customers.

Shares of Twitter fell another 3% as the market opened.

Adding to the social media turmoil is Facebook’s parent company Meta. The company said it would begin providing more details on how advertisers target people with political ads just months before the US midterm elections.

Meta is particularly sensitive to changes made at Apple and is currently fighting a civil lawsuit against its chief, Mark Zuckerberg. On Monday, the District of Columbia filed a lawsuit against Zuckerberg seeking to hold him personally responsible for the Cambridge Analytica scandal, a privacy breach of millions of Facebook users’ personal data that has turned into a major corporate and political scandal.

Shares of Meta Platforms Inc. fell harder than any other company on Tuesday’s opening bell, down almost 8%.