Ads falter

Wednesday, May 25, 2022 by Robinhood Snacks |
Empty ad space (Zoran Milich/Photodisc via GettyImages)

Empty ad space (Zoran Milich/Photodisc via GettyImages)

Empty ad space (Zoran Milich/Photodisc via GettyImages)

Empty ad space (Zoran Milich/Photodisc via GettyImages)

Yesterday’s Market Moves
S&P 500
3,941 (-0.81%)
Nasdaq
11,264 (-2.35%)
Dow Jones
31,929 (+0.15%)
Bitcoin
$29,588 (-0.17%)

Hey Snackers,

It’s hard to find words for events like yesterday’s. At least 18 children and a teacher were killed in an elementary school shooting in Uvalde, Texas — after gun violence became the leading killer of young Americans during the pandemic. Our hearts are with those who have lost loved ones to senseless violence.

Stocks closed mixed after Snap dragged the tech-heavy Nasdaq down more than 2%. The Dow ended slightly higher, putting it in a better position to break an eight-week-long losing streak — its longest since 1923.

Deteriorating

1. Snap’s profit warning sends tech stocks tumbling on fears of an ad-market crash

Fall from grace… In the time it took you to lose your Snapstreak, Snap lost $15B in market cap. Shares plummeted 43% yesterday — the worst day ever for the Snapchat parent. Driving the plunge: Snap warned investors that it expects growth to slow as macro conditions continue to “deteriorate” (CEO Evan Spiegel mentioned inflation and war… and even the supply chain).

  • Quick reversal: Just four weeks ago Snap gave a relatively upbeat forecast for the current quarter. But Spiegel said the economic environment has gotten worse than expected since then.
  • Bumpy road ahead: As a result Snap pumped the brakes on revenue, earnings, and hiring expectations for the year.

Snap’s ghost casts a long shadow… Snap’s ominous update halted the tech industry’s fragile rebound attempt: social-media stocks alone lost about $165B in market value after the warning, as the Nasdaq fell 2%. But those that rely on digital ads got hit hardest:

  • Bad news for ad views: Shares of Twitter, Google, and Meta all fell by around 5% yesterday. Smaller platforms had it even worse: Pinterest plunged 24%.
THE TAKEAWAY

Advertisers are tightening their belts… just like everyone else. Snap’s ad business is relatively modest: Meta made 30X more $$ last year. But Snap’s surprise statement caused concern, partly because its ad biz has outperformed its larger rivals’ by adapting more quickly to Apple’s privacy updates and sustaining strong user growth. So if Snap’s struggling, other companies highly dependent on digital advertising might be on track to do worse. Cue: Meta’s market cap shed $53B yesterday — more than twice Snap’s entire valuation.

Rezzy

Checking in at the meta-lobby… don’t forget your crypto wallet. The hospitality industry is warming up to NFTs as a way to turn vacay cancellations into tradable tokens. Reservation “no-shows” and last-minute cancellations account for up to $100M in lost sales for US hotels every year. Now hotels are turning to the blockchain to make up for it:

  • For hotels: Pinktada, a new booking platform, teams up with local resorts to take room reservations in hotspots like the Caribbean and Hawaii and turn them into NFTs.
  • For guests: They can reserve rooms by buying those NFTs from Pinktada at a lower rate than if they booked a refundable room from the hotel. If they need to cancel, there’s an option to gift or resell the rezzy on Pinktada's NFT marketplace (think: StubHub for hotels).

Welcome to CaaE… or Crypto-as-an-Experience. NFT sales have plummeted as speculative investments get crushed by higher interest rates. But a growing variety of industries — from cattle farming to fine dining — are turning to the blockchain for real-world applications. The hotel biz is just the latest:

  • Crypt-el: Last month NYC’s NoMo SoHo became one of the first US hotels to offer NFT-based packages with IRL perks like late checkout and free breakfast.
THE TAKEAWAY

Sounds like a travel dream… at least for hotels. While they get to offload extra inventory and keep the sales from last-minute cancellations, travelers take on the burden of reselling their room — or being stuck with it if they can’t. Plus bot-operated ticket resellers could lock up blocks of rooms during popular travel periods, hoping to flip them at a profit. It's TBD how or if the trend will catch on as major hotel players like Hilton or Marriott sit on the sidelines.

What else we’re Snackin’

  • Clicky: The consumer-tech boom is slowing: Best Buy’s sales fell 8% from a year ago, when people stocked on WFH gadgets and Switch consoles. BB lowered its forecasts, but isn’t expecting a recession.
  • Unmusk: Volkswagen’s CEO said VW would overtake Tesla to become the world’s largest EV seller by 2025. While OG carmakers aim for Tesla’s lead, supply crises are complicating the road ahead.
  • Cologne: Abercrombie lowered its annual forecasts after a surprise quarterly loss. The early-2000s staple took a hit on surging transportation and materials costs, which even $80 ripped jeans couldn’t help.
  • Prep: The Atlantic hurricane season is expected to be “above normal” for a seventh year straight, with as many as six major ’canes. A bad Gulf Coast storm could knock out already tight oil-refining capacity.
  • Dewy: Glossier founder Emily Weiss is out as CEO of the Gen Z-fave minimalist beauty brand, famous for its ’grammable packaging. Chief commercial officer Kyle Leahy is taking over as Glossier tries to regain its shine.

Snack Fact of the Day

US births increased last year for the first time since 2014

Wednesday

  • Earnings expected from: Nvidia, Snowflake, Williams-Sonoma, Dick’s Sporting Goods, Toll Brothers, and Guess
  • Twitter, Amazon, and Meta shareholder meetings

Authors of this Snacks own shares of: Twitter, Google, Snap, Apple, Amazon, and Tesla

ID: 2217540