Two major social media platforms appeared to be struggling from a revenue standpoint, as Snapchat reported its weakest sales growth ever and Twitter reported a loss of $270 million in quarterly reports. The losses can be partially explained by uncertainty about the U.S. economy, with social media platforms taking a big hit in ad revenue.
Initial filings for unemployment benefits rose by 7,000 last week and are up 51% from mid-March, according to the Labor Department. The increase in layoffs could be connected to companies feeling the rise in inflation and making cuts, including on advertisements.
Snapchat painted a grim picture of the effects of a weakening economy on social media in quarterly results on Thursday. Shares in Snapchat’s parent company have fallen 25% after it confirmed investors’ fears of a slowdown in advertising revenue for social media firms. The company said some advertisers continued to face supply chain disruptions and labor shortages, and many others were contending with rising costs amid record inflation, which has led to cuts in spending on advertising.
Daily active users rose 18% year-over-year to 347 million, beating consensus estimates of 344 million users. Despite the good news for the company, a researcher director indicated it still doesn’t help with an ad-centric business model.
“While the platform’s user base remains strong, Snap’s ad-centric model is no longer a sure bet and is especially volatile heading into a period of economic headwinds where marketers are sure to pull back their ad spend,” Mike Proulx, a research director at analysis firm Forrester, said.
Like Snapchat, Twitter reported a quarterly loss Friday, with revenue slipping $270 million. The number reflects advertisement woes for Twitter too, but there is another driving force behind the decline. The future of the company is now for the courts to decide after Elon Musk moved to terminate the acquisition.
