Supply-chain woes hitting social media as firms cut back on holiday advertising, says Snap

SAN FRANCISCO (BLOOMBERG) – Snap warned on Thursday (Oct 21) that supply-chain bottlenecks are prompting companies to hold back online advertising spending for the looming holiday season, sending shares of larger rivals Google’s parent Alphabet, Facebook and Twitter tumbling.

The Snapchat parent said holiday-quarter sales would grow 28 per cent to 32 per cent from a year earlier – below analysts’ estimated growth of 48 per cent. That forecast came chiefly because marketers aren’t planning to advertise for products they can’t sell, according to Snap’s chief business officer, Jeremi Gorman.

“We have heard from advertising partners across a wide variety of industries and geographies that they are facing headwinds in their business related to disruptions in global supply chains as well as labor shortages and increasing costs,” Mr Gorman said in prepared remarks ahead of a conference call. “We expect that some of these clients may opt to slow their marketing spend given the diminished need to drive incremental demand.”

Shares of Snap tumbled more than 25 per cent in extended trading after the company reported US$1.07 billion (S$1.44 billion) in third-quarter sales, missing analysts’ average estimate of US$1.1 billion.

Facebook shares dropped more than 6 per cent following Snap’s report. Twitter fell as much as 8 per cent, and Google parent Alphabet slipped about 3 per cent. Twitter, Facebook and Alphabet all report third-quarter earnings next week.

A global shortage of chips and other components has caused havoc for a range of industries, including retail. Out-of-stock messages increased 172 per cent compared to January 2020, according to recent research from Adobe. Some in the ad industry see supply-chain snags hitting electronics, cars and consumer-product brands – all of which are big digital marketers.

Other advertisers have been less affected, for now. “We aren’t seeing en masse or wholesale pullbacks yet,” said David Cohen, chief executive officer of the Interactive Advertising Bureau, in an interview last week.