Snap May Benefit from Twitter’s Loss of Advertisers

Snap Inc. (SNAP), one of the smaller social media networks, could be one of the primary beneficiaries of Twitter’s loss of advertisers.  MKM Partners estimates that Twitter could lose almost a third of its ad revenue as companies abandon the social media site. Bloomberg Intelligence said if Snap can acquire new advertisers on its platform, that would be a long-term positive. Once advertisers shift their dollars to a platform, they are unlikely to abandon it soon. 

Many companies, including Volkswagen AG, General Mills, and Pfizer, have scaled back or stopped advertising altogether on Twitter due to concerns that new-owner Elon Musk’s looser moderation policies will make the social media site less hospitable.  Musk acknowledged recently that the defections led to a “massive drop” in Twitter’s revenue.

Triple D Trading said, “what is bad for Twitter might actually be good for Snapchat,” the multimedia instant messaging app and service developed by Snap Inc.  A defection of advertisers to Snap from Twitter would certainly help revive Snap’s share price, which has lost more than three-quarters of its value this year.

MKM Partners said that Snap could draw about 5% to 8% of the ad dollars marketers would have spent on Twitter.  However, Bloomberg Intelligence said that even if Snap only draws 5% of ad dollars from Twitter, that should help the company handily beat Q4 revenue estimates.  Social media companies have been battered along with other technology stocks this year, so any boost from Twitter’s woes would be welcome.  In particular, Snap has been hurt by increased competition, difficulty tracking users due to Apple’s new security measures, and the weakening ad market.

Even though technology stocks have rebounded in the second half of this year, social media stocks have lagged.  Shares of Meta Platforms (META) and Snap have tumbled -24% and -23%, respectively, since June 30, while the Nasdaq 100 Stock Index is up +2.5%.  Bloomberg data shows analysts have cut estimates for Snap’s Q4 revenue by 20% over the past six months to $1.3 billion.  MKM Partners said, “Snap is an attractive alternative to Twitter advertisers, and any marginal share shift would be a clear needle mover for Snap’s fundamentals.” 

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