This year so far has been tough for investors in social media companies.
Shares of Facebook and Instagram owner Meta Platforms are down more than 40% so far in 2022.
Investors are worried about CEO Mark Zuckerberg’s plans to turn the company into a metaverse player. The ticker symbol is changing from FB to META on Thursday (2).
Zuckerberg will also have to navigate this transition without his trusty lieutenant Sheryl Sandberg, who will step down as COO later this year.
Snapchat is reeling after a shock from an earnings warning a few weeks ago. Stocks are down nearly 70% this year. Pinterest has lost about half of its value. Even Alphabet, the owner of YouTube and Google, has stumbled. Shares are down about 20%.
And then there’s Twitter. Despite the fact that Tesla CEO Elon Musk has offered to buy the company for around $44 billion, Twitter shares are still down 11% this year and are trading more than 30% below their offer price. of $54.20 per share of Musk.
Wall Street is now skeptical that a deal will actually be made at the original price – if it is.
It seems investors have finally come to the conclusion that social media stocks are essentially just media stocks.
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This means that despite their higher growth rates, social media companies are still subject to fickle changes in advertising budgets and user behavior, just like traditional media companies such as television networks and newspapers.
Categorizing social media platforms as tech stocks can be a mistake.
Social media companies face other challenges that are also hurting their share prices this year.
The Global X Social Media ETF, which owns a basket of social media stocks from around the world, is down more than 30%.
Changes to Apple’s privacy tracking features in its iOS operating system have wreaked havoc across the social media industry.
Meta warned in February of a potential $10 billion hit to its revenue, and Zuckerberg said during the company’s first-quarter earnings call with analysts in late April that the iOS changes are “a significant headwind” for the company. Meta and his rivals.
Rise of TikTok
Competition is also an issue. Social media companies live and die by their user growth metrics.
Privately owned TikTok now has all the momentum, particularly with the younger Millennials and Gen Z subscribers that advertisers want.
Morningstar analyst Ali Mogharabi said in a report following Alphabet’s first-quarter earnings in late April that one of the reasons YouTube’s ad revenue growth “was a little disappointing” was in part due to ” increased competition from Meta, Snap, Twitter and Pinterest, as well as newcomers like TikTok.”
Big brands are also increasingly embracing TikTok, which could hurt other social media companies.
“We continue to focus on social platforms relevant to the younger Gen Z consumer,” Stefan Larsson, CEO of Calvin Klein and owner of Tommy Hilfiger PVH, said in his latest earnings call.
Larsson noted that a #onlyinmycalvins hashtag challenge on TikTok generated “significant views” in 10 countries.
Fabrizio Freda, CEO of makeup giant Estee Lauder, also noted in his latest earnings call that a new mascara brand called MACStack, targeted specifically at Gen Z and Millennial consumers, “has gone viral on TikTok.”
Freda said the company quickly racked up more than 153 million views for the product on the video-sharing platform and that sales “far exceeded our expectations for the quarter.”
Madison Avenue advertising agencies took notice, too.
“TikTok is clearly showing up and making a very big impact,” Philippe Krakowsky, CEO of Interpublic, a marketing firm that owns advertising agency McCann, said on his last earnings call in April.
That’s not good news for Meta, Snapchat and Twitter.
Source: CNN Brasil
