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Social Media Stocks Lose $42 Billion in Market Value on Ad Spending

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Social media shares drop as Twitter, Snap warn of tighter ad spending

Shares of social media firms fell sharply on Friday after the owner of Twitter Inc and Snapchat indicated that advertisers were tightening their purse strings in response to a darkening economic outlook.

Pinterest Inc. fell 11.3 percent, Facebook-owned Meta Platform Inc. dropped 5.6 percent, Google-owned Alphabet Inc., which also sells online ads, fell 3.3 percent.

At current prices, Pinterest, Meta, Twitter, Alphabet and Snap were set to lose approximately $42 billion in market value collectively.

Twitter also blamed its ongoing battle to close its $44 billion acquisition by Elon Musk for the surprising drop in quarterly revenue. Shares of the micro-blogging site were down 0.1 per cent in choppy trading.

Snap Inc said on Thursday that advertisers have reduced spending amid rising interest rates and rising inflation as some of them grapple with labor shortages and supply chain disruptions.

“If you want proof that companies are nervous about the economic outlook, look at how media platforms and marketing agencies are lamenting a tough advertising market,” says Russ Mold, investment director at AJ Bell. he said.

Investors are poised for the slowest global revenue growth in the history of the social media sector as Apple Inc’s privacy cloud further changes its outlook.

Shares of Snap Inc. were down 36.4 percent and were the most traded on US exchanges, as the company said it was exploring new sources of revenue.

“Unfortunately for Snap and the digital advertising sector, we believe there are signs of further ad spend cuts,” RBC Capital Markets said in a note.

Now the focus turns to next week’s quarterly reports from mega-cap firms Meta and Alphabet. Some analysts believe that the fall in their share prices indicates that the report is likely to soften.

Analysts at Bank of American Global Research said, “While there is potential for more revenue cuts for advertising stocks, we think Alphabet has greater relative revenue stability, breadth of advertisers, greater spending flexibility than most peers.”

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