Snap breaks bad news on ads

Things are going south fast for social media, with Snap warning overnight of a rapid deterioration over the past month in the “macroeconomic environment”, leading to its shares falling more than 40 per cent so far today.

The difficulties for the parent of camera app Snapchat have spooked investors in its peers as well — Twitter is down 4 per cent, Alphabet 6 per cent, Meta 9 per cent and Pinterest 22 per cent.

All rely on advertising for the bulk of their revenues and Snap said it was expecting revenues for the current quarter to now come in below the low end of its current guidance of 20 to 25 per cent growth year on year. Morgan Stanley analysts said the guidance had already assumed the operating environment became more challenging and that some ad campaigns would be paused or cut. “We expect all online ad platforms to feel some impact of a significant consumer pullback,” they said.

In a memo to staff, chief executive Evan Spiegel said that while the fundamentals of the business remained “strong”, the company faced “rising inflation and interest rates, supply chain shortages and labour disruptions, platform policy changes, the impact of the war in Ukraine and more”. Lex says Snap’s hopes of positive net income this year may be over.

The swath of problems listed by Snap’s CEO triggered a more broad-based sell-off, with the S&P 500 down 2 per cent on Wall Street and the tech-heavy Nasdaq falling nearly 3 per cent.

Snap calls itself a camera company, but its app relies on smartphones, whose sales are in decline. The Gartner research firm reported today that worldwide smartphone sales fell 10 per cent year-on-year in the first quarter, hit by factors including “delayed product launches due to ongoing component shortages, rising inflation and poor consumer confidence”.

Analysts at Canalys said shipments in Europe fell 10 per cent in the first quarter, with most of the decline due to Russian and Ukrainian shipments falling by 31 and 51 per cent respectively. However, the wider effect on inflation and consumer confidence meant “the real test for the smartphone market will come in the next two quarters, when the economic impact of the war truly starts to be felt”. 

The Internet of (Five) Things

1. Tech convertible bonds fall
Convertible bonds sold by high-flying tech companies last year have plummeted. Spotify and Peloton were among a clutch of companies that sold convertible debt, a type of bond that can convert into equity, at the top of the market. However, those bonds are now sinking in price as the prospect dims that their shares will reach the lofty levels needed to allow the debt to morph into equity.

2. Airbnb gives up on China
Airbnb will close its China business this summer after a years-long push to crack the market was throttled by the impact of Beijing’s harsh zero-Covid strategy on domestic and international tourism. Lex says Airbnb’s retreat hands an opportunity to Meituan. The food delivery giant launched its own room rental platform in 2017.

3. Amazon’s annual ear-bashing
Amazon shareholders will challenge the company on executive pay, tax transparency, working conditions and unionisation on Wednesday, as chief executive Andy Jassy faces his first annual meeting at the helm of the ecommerce and cloud computing giant. The $1tn tech company is opposing all 15 of the shareholder proposals, the most it has faced since 2010.

4. S Korea turns against the ‘Lunatic’ crypto leader
Do Kwon, the brash 30-year-old behind the terraUSD, is now the most “hated man in South Korea” after the collapse of the stablecoin. Kwon’s high-profile backers, global marketing strategy and bruising social media persona helped attract attention and retail investors. But now many have lost everything. The Money Clinic podcast talks to one saver who watched in horror as his $7,000 crypto holdings in luna and terra collapsed.

5. Digital No-Mad era
Cristina Criddle tried four days working as a digital nomad on the Portuguese island of Madeira, where the village of Ponta do Sol rebranded itself as a destination for such working-from-anywhere travellers last year. She found tech in paradise was not all it’s cracked up to be.

Tech tools — Logitech MX Mechanical

Logitech has expanded its Master Series of high-end peripherals with two new mechanical keyboards — the full-size MX Mechanical and minimalist MX Mechanical Mini — and MX Master 3S mouse to accompany them. The mechanical typing has three settings to help you fix on a personal preference — Tactile Quiet, Clicky and Linear all have a distinct feel and sound. Backlit keys light up as your hands approach the keyboard and there are a number of effects offered, such as reaction lighting where each time you press a key it lights up in response. The wireless keyboards need to be charged with a USB-C cable, but they can stay powered for up to 15 days on a full charge — or up to 10 months with backlighting turned off. The keyboards and mouse are available now, with the MX Mechanical priced at £169.99, the Mini at £149.99 and the mouse at £99.