Investor Relations

Why Meta Tanked and Snap Soared

|
Meta recently suffered the worst single day drop in stock value for any company while Snap saw a 62 percent rise. Click to learn more.

Meta recently made history. The wrong kind of history. On February 3, Meta, the parent brand of Facebook, Instagram, and WhatsApp, suffered the worst single-day drop in stock value for any company. How bad was it? $232 billion kind of bad. That’s how much value Meta lost. In one day. 

What made the news even more bracing for Meta: Snap, the parent of Meta’s rival Snapchat, dunked on Meta with its own earnings announcement as Meta was reeling: Snap announced its first profitable quarter ever, and saw its stock value rise by 62 percent. So, why did Snap’s fortune’s rise during earnings week while Meta’s tanked?  

The Consumer Privacy Factor 

Many variables affect the value of a stock price on any given day. Many of them are out of a company’s control, such as global events, a downgrade by an analyst, and the overall economic climate, to name a few. It is not always easy to explain why a business realizes a gain or loss in its market value. One variable that does have a clear cause-effect on a company’s stock price: earnings announcements. (Quarterly and annual earnings can have such a dramatic impact on the stock price of a business that governments regulate how and when companies can release that information.) That’s why it’s instructive to take a closer look at the message that publicly traded firms share to investors on announcement day. 

And the difference between Meta’s and Snap’s message could not have been more different on one crucial topic: consumer privacy. 

Consumer privacy is one of the compelling topics of 2022 as it has been for the past few years. As IDX Chief Digital Officer David Corchado wrote recently, more than half of consumers believe that companies do not operate with their best interests in mind, and six out of 10 fear that their personal data is vulnerable to hackers. Governments around the world have responded by enacting consumer privacy laws, but it has not always been easy for businesses to comply with them. On top of that, Big Tech firms such as Apple and Google have been developing consumer privacy controls of their own:  

  • Google intends to phase out third-party cookies by 2023 on the Chrome browser, which is expected to limit the efficacy of online ads that rely on third-party cookies.  
  • Apple enacted a significant privacy control in 2021: Apple changed its operating system to require users of Apple devices (significantly, iPhones) to agree to have their data tracked by apps. Up until then, users did not have to opt in. This was an important development: when users were given the choice to opt out, 62 percent decided to do so.  

Leading up to investor week, the Apple news mattered especially because Apple beat Google to the market with a privacy control, known as Application Tracking Transparency (ATT). This development threatened advertisers and ad platforms that rely on third-party data to serve up targeted ads (just as Google’s own initiative is likely to do).  

Including platforms such as Meta. And Snap. 

How Meta and Snap Discussed Consumer Privacy During Earnings Week 

No one knew exactly how much impact ATT would have, but the general consensus was that anyone who creates targeted ads that rely on third-party data would need to come up with a solution to appease advertisers. Investors were watching closely to see how ad platforms would react. 

Well, during earnings week, Snap reacted well. Meta did not. 

In a call with investors, Snap said that the company had grown revenue 64 percent year over year in 2021, including 42 percent year-over-year growth in the fourth quarter. The company also shared compelling examples of breakthroughs it has made with augmented reality (AR). This was important because innovations in AR have always been important to Snap’s growth strategy.

Things got really interesting when Snap’s Jeremi Gorman discussed how Snap has worked around the impact of Apple’s ATT privacy control. There’s a good deal of technical lingo in his remarks, but it was necessary for him to support his contention that Snap is not being hurt by Apple’s privacy measures. He stressed, for instance, how the Snap Pixel helps advertisers track user data, which is essential for serving up targeted content:  

We are seeing these advertisers migrate to mid-funnel goals, where they have greater visibility such as install or click. Advertisers, who optimize via web-based, goal-based bids or GBBs, have been less impacted, given that many of them have adopted the Snap Pixel. Many of our advertisers have enabled both Apple's SKAdNetwork or SKAN, as well as our own first-party measurement solutions, which we broadly refer to as Advanced Conversion, or AC. While SKAN has benefits and its ability to report DDuped results across multiple platforms, AC offers our performance advertisers much more flexibility and more advanced features. 

We continue to improve Advanced Conversions with features such as estimated conversions, which augments observed conversion data with real-time data to help in better decision-making. Ultimately, first-party integrations allow us to build out measurement solutions, based on advertiser input and directly connect to how our formats and targeting work so that businesses have the most accurate view of ROI. These allow us to preserve the privacy of our community while helping advertisers weather the disruption from platform changes. We believe it will take time to achieve broad enablement, utilization, and full confidence in these measurement solutions among our advertiser base. 

Snap had discussed the relationship between the Snap Pixel and ATT in 2021. Snap’s IR communications during earnings week essentially updated the market on how the Snap Pixel was helping to soften the blow of Apple ATT. 

By contrast, Meta shared a much more sobering assessment. Here are some key excerpts from Meta’s investor call: 

Like others in our industry, we’ve faced headwinds as a result of Apple’s iOS changes. As we described last quarter, Apple created two challenges for advertisers. One is that the accuracy of our ads targeting decreased, which increased the cost of driving outcomes. The other is that measuring those outcomes became more difficult. 

These challenges are complex and interrelated. We’re working to try and improve things, for example by making progress in closing the underreporting gap for iOS web conversions, and by introducing tools like our Aggregated Events Measurement solution to deliver better insights for advertisers. These efforts will help to mitigate some of the challenges, but we expect the overall targeting and measurement headwinds to moderately increase from Apple’s changes and from regulatory changes in Q1 and throughout 2022 . . .  

And we believe the impact of iOS overall as a headwind on our business in 2022 is on the order of $10 billion, so it's a pretty significant headwind for our business. And we're seeing that impact in a number of verticals. E-commerce was an area where we saw a meaningful slowdown in growth in Q4. And similarly, we've seen other areas like gaming be challenged. 

Notice the distinctions? 

  • Snap shared progress made and minimized the impact of Apple ATT on its business. 
  • Meta shared progress on the horizon and assigned a very big number -- $10 billion – on the expected cost of Apple ATT. 

Of course, privacy is not the only issue at play here. Meta also announced a first-time ever global drop in its average monthly users and said its investments into metaverse technologies have cost the company billions of dollars. But the uncertainty about how the company has managed Apple ATT fanned the flames of investor alarm. 

What Should Meta Do? 

So, what can Meta do going forward? The company needs to report progress made in its Aggregated Events Measurement system and convince investors that advertisers overall are sticking with Meta. Meta will need to lean into: 

  • Details about how tools such as Aggregated Events Measurement really work. 
  • Data on advertiser retention. 
  • Testimonials from advertisers about how Meta is helping them. 

Advertisers abandoning Meta or boycotting Meta is not unheard of – what we don’t always hear is how many come back to Meta. In fact, Meta remains a highly effective platform compared to many other social apps. Meta needs to tell that story through IR. 

Contact IDX

For more insight into how to tell your brand’s story to shareholders, employees, and customers, contact IDX. From results and regulatory releases, to complex embargoed announcements, we make sure that our clients’ digital communications are always on time, on message, and error-free. Our service team is on hand day or night, every day of the year, to assist with clients’ communication needs, whether that’s posting a press release, running and managing a results webcast, or preparing your website for an IPO. Our Connected Content™ gives you access to the best of corporate communications and performance marketing, meaning you can efficiently and confidently reach the people who matter. This is why 2,000 leading companies trust us to manage their digital investor relations communications.