Shares of Snap Inc’s rivals Facebook and Twitter, as well as other social media and digital advertising companies, were down in after-hours trading yesterday after the company reported its third-quarter earnings. The company missed the expectations of analysts causing its stock to plunge by 25 percent. The company’s inability to meet analysts’ expectations were as a result of Apple’s newly introduced App Tracking Transparency (ATT) feature for iPhones. The company thought that the effect would take over in its fourth-quarter results but they took effect earlier than expected. Snap (and virtually all tech companies) also blame the disruptions in spending on advert and supply chain for poor performance.
After Snap reported its earnings yesterday, Facebook’s shares dropped 6 percent while that of microblogging platform Twitter dropped 5 percent after hours. Alphabet shares were down over 2 percent after Snap’s announcement. Pinterest which is being considered for purchase by payments company PayPal also dropped more than 2 percent yesterday.
Digital companies that thrive on consumer data were not left out. These companies were also affected yesterday. Magnite and The Trade Desk saw their shares drop by more than 5 percent while that of Liveramp was down almost 4 percent after hours.
Apple’s App Tracking Transparency (ATT) feature for iPhones has been hugely criticized by technology companies. With the ATT feature, users are asked through a pop-up notification if they want to opt-in for tracking and this is bad business for these tech companies as the ATT feature makes it harder for them to track how effective their digital ads are.
Yesterday, Snap’s CEO Evan Spiegel said that “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”. He also added that the “short-term appetite to generate additional customer demand through advertising” is the reason the company is providing weaker guidance for the next quarter.
A few months ago, however, the CEO said that “We really feel like Snapchat wouldn’t exist without the iPhone and without the amazing platform that Apple has created. In that sense, I’m not sure we have a choice about paying the 30 percent fee, and of course, we’re happy to do it in exchange for all the amazing technology that they provide us in terms of the software but also in terms of their hardware advancements”.
Facebook and Twitter are both set to release their earnings reports this week. It will be interesting to see how they both performed.