Shares of major social media companies plunged on Friday, a day after Snap reported earnings that showed advertising revenue took a hit after Apple’s iPhone privacy changes, a trend that also looks set to impact the earnings of competitors like Facebook, Twitter and Google parent Alphabet.
Shares of Snap are so far down 23% after third-quarter revenue of just over $1 billion came in below expectations, as the company admitted Apple’s iPhone privacy changes from earlier this year impacted advertising sales more than anticipated.
Even with the Dow Jones Industrial Average and S&P 500 sitting near record highs, the Nasdaq fell 0.8% on Friday, as social media and digital advertising companies saw their stocks take a hit on the Snap news: Facebook was down 5.6% and Twitter fell 4.3%.
Apple’s privacy changes for the iOS 14.5 update of the iPhone operating system were rolled out in June and July, implementing a new feature called App Tracking Transparency that reduces the effectiveness and profitability of targeted advertising.
While social media companies were aware that Apple’s privacy change would affect advertising revenue later in the year, if Snap’s latest earnings are any indicator, the impact has been more disruptive than expected.
Facebook, which reports on Monday, has been the most vocal company by far about the negative impact of Apple’s privacy changes, first warning in July 2020 that it would hurt their ability to target ads.
Twitter, which reports earnings on Tuesday, relies on advertising for a large chunk of its revenue and may also see revenue take a hit for the same reasons.
Even shares of larger tech companies like Amazon and Google-parent Alphabet are feeling the crunch amid a wider tech selloff, down 2.4% and 3.3%, respectively, by midday on Friday.
Big Number: $26.6 Billion.
That’s how much the combined fortunes of major tech founders plunged on Friday. Snap cofounders Bobby Murphy and Evan Spiegel, Amazon CEO Jeff Bezos, Google cofounders Larry Page and Sergey Brin, Facebook CEO Mark Zuckerberg and Twitter cofounder Jack Dorsey are a combined $26.6 billion poorer as of 12:30 p.m. ET, according to Forbes’ estimates. The two Snap cofounders are down a combined $7 billion alone.
“This has definitely been a frustrating setback for us,” CEO Evan Spiegel told analysts on Thursday. “While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS.”
What To Watch For:
“The tech earnings season has barely begun, but so far there have been more disappointments than upside surprises,” says Vital Knowledge founder Adam Crisafulli. The iOS headwinds that affected Snap’s earnings will likely extend to some of the mega-caps like Google and especially Facebook, he argues. Analysts at Morningstar, however, remain largely upbeat on social media companies. Although advertisers displayed hesitancy in purchasing ads due to uncertainty surrounding Apple’s changes as well as some supply and labor shortages, analyst Ali Mogharabi writes, “we think Snap, its peers, ad agencies, and ad-techs will address the Apple issue.”