Snapchat stock fell more than 30% yesterday, while Meta, Pinterest, Google, and Twitter also experienced drops. Snapchat has stated that it is expected to report revenue below what it anticipated for second quarter, which is most likely the cause for the sharp decline in yesterday’s extended session.
Employees were informed that the company will slow down hiring and look for cost saving options in its remaining budget for the year. Neither of these are good things for the company. As an advertiser, what does this means for you and what steps should you take? Read on to see what is really the takeaway from this news.
Snapchat is saying they are experiencing lower growth than expected because of lower advertiser spend. With inflation out of control, employee shortages, and supply chain issues, many advertisers have limited their marketing spend, specifically on digital channels like Snapchat that may not result in immediate direct sales. This could be a defining moment for the brand.
What we’re seeing is these fringe digital platforms like Snapchat, that were never great on ROI and operate more as a branding platform are the first to go when advertising budget is limited. When digital first came to advertising, there were limited channels. The biggest options were display banners, Facebook, and Google. Since then, more social media platforms like Snapchat, Pinterest, Twitter, YouTube, TikTok, and others entered the sphere and pulled advertising dollars their way. Now, there’s countless platforms and unlimited spending to reach your intended audience. Perhaps the news about Snapchat is only the beginning. If a client wants to cut advertising, one of the first things we’d recommend is Snapchat.
I would not recommend cutting Google as a first, second, or even third option. The search platform historically has the best ROI. Instead, Snapchat may very well be the canary in the coal mine of lesser social channels.
Are we surprised? …No. Are we disappointed? …Also no. Snapchat’s return has always been less and the platform’s user growth in North America slowed back in 2019. Out of the 293 million users on the platform, the US only accounts for only 30%. Although Snapchat has a great young demo audience, the older generations just didn’t adopt the platform like they did others.
What should you do if you’re spending money on Snapchat? Consider moving it to a better direct ROI channel, like Google or Facebook. We rarely meet any client who can’t spend more on Google and see a great increase in return. Or, if you’re clinging to this smaller channel use of marketing dollars, shift your dollars to TikTok, where their user growth is huge and the competition is significantly low. Snapchat is most likely only the beginning to a great exodus of social ad dollars. Someone’s got to be the first.