The company's second-quarter earnings led to a brutal tech sell-off with investors concerned about what the company's report said about social media's ability to monetize their platforms through advertising.
Shortly after the opening bell on Friday, the shares of the company were trading at a loss.
The company's earnings reports have become a focal point for investors trying to evaluate whether the economic climate is affecting businesses' advertising budgets
The company blamed its slump in revenue on the uncertainty surrounding Musk's takeover bid.
More than $75 billion was wiped off of American social media giants' stock market values after the company's disappointing earnings report.
After reducing its forward guidance in May, the company's second quarter earnings failed to meet analysts' expectations.
According to the Financial Times, the company reported revenues of $1.11 billion in the three months to the end of June, just below analysts' estimates.
The increase in revenue was still a small one.
The company admitted that the second quarter had been more challenging than they had anticipated.
Evan Spiegel said in a statement on Thursday that the company was shifting its business model to accelerate revenue growth.
On the same day that external companies were cutting their digital advertising budgets due to rising economic uncertainty and inflationary pressure, a letter was sent to investors by the company.
Targeting advertising has become more difficult due to Apple's privacy changes, which ask device users if they want to allow individual apps to track their data.
Scott Kessler, vice president and global lead for industrial materials and energy at Third Bridge, told Fortune in a phone call on Friday that there was "no question that conditions are such where things could definitely get worse."
He told Fortune that you have a number of obstacles. The negative effects of coming out of the Pandemic where a lot of these companies benefited handsomely and now we're seeing the flipside of that, and we're also seeing the direct impact of an uncertain economy at best and a recession at worst.
He said that companies were not particularly aggressive with their advertising at this time of year.
In a note to investors on Friday, Dan Ives argued that the disappointing earnings of the company had not been as bad as they had been previously thought.
Digital ad spending is not falling off a cliff like feared, which is a positive for others in the space, such as Facebook, and Google.
In an email to Fortune on Friday, Dr. Robin Robin said that the rising star of TikTok would disrupt the digital marketing space.
The stock decline among social media companies will push them to adapt their offerings. Facebook is set to adapt its feed style to focus on recommending new content, following the model of their competitor TikTok, as evidenced by the launch of the web based version of the app.
Robin said that if there was a recession, the companies did not cut their advertising budgets as they needed to maintain their brand presence.
He said that with inflation and recessions, companies will rethink how they use their advertising budgets.
The decision to increase or decrease their budgets on social media ads will depend on a number of factors.
CFRA Research analyst Angelo Zino said in a research note on Thursday that his long-term outlook for the company remained positive despite the firm cutting its price target for the company.
He said that they are growing more concerned about business prospects due to macro issues and rising competitive pressures.
While the growth trajectory for ad spend across the social media space has come to a halt, we believe that snap remains better positioned than most to monetize the platform long term given healthy user engagement levels, an attractive installed base/ young audience, and efforts in augmented reality.
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