00:00 Speaker A

Well, Snap declined to provide guidance for the upcoming quarter, citing uncertainty over evolving macro conditions and the impact on advertising spend. Here to discuss the broader landscape for social media ad spend. We are joined by Jasmine Enberg, e-marketer VP and principal analyst. Jasmine, great to have you here. So, Snap talking about this ad revenue under pressure already because of a pause in spending from its customers. But that wasn’t really an issue for the likes of Alphabet. Is this a Snap specific problem?

00:40 Jasmine Enberg

It’s certainly not a snap specific problem, but Snap is more susceptible to overall volatility within the economy because it is a smaller player in the digital ad market. We’re expecting Meta, or Meta will report earnings today, and I’m expecting similar dynamics from Meta, like we saw at Snap. However, eventually and ultimately for Meta, the impact will probably be less than it is at Snap because it isn’t central part of advertiser budgets. It’s a must buy for advertisers. So even in times of economic volatility and uncertainty, while we could certainly and probably will see a slowdown, it won’t be as severe as for a smaller player like Snap.

01:56 Speaker A

And talk to me then about the extent to which Snap may be a bellwether for Meta earnings coming up after the bell here.

02:06 Jasmine Enberg

Snap certainly is a bellwether. I think it gives us a good look and an early picture of what is going on within the digital and social marketing advertise, market overall. And what we saw is that there, it was a very strong Q1 for Snap. Again, I’m expecting the same for Meta. But there is a lack of visibility and a lot of volatility going into Q2. So we can expect similar stories from Meta and other social platforms that are reporting later.

02:58 Jay

Hey, Jasmine. This is Jay. There were some bright spots in this call. I mean, if they reported this quarter without the tariff uncertainty, we’d be probably talking about up 10 to 15% on this stock. Uh, the one that stood out to me was monthly active users continues to impress. Could this be a buying opportunity? What are the positives you’re seeing out of the results themselves, besides the continued uncertainty in the market?

03:38 Jasmine Enberg

Yeah, absolutely. There were several bright spots in in Snap’s earnings report. And one of them, of course, was the growth of monthly active users. The one thing I would say there though is that a lot of the growth came from outside of North America, which is Snap’s most lucrative market. And we actually saw a drop in daily active users in North America this quarter. And so that results in, you know, significant disruption to its usage. And a lot of that probably has to do with the fact that Snap was undergoing a test of a new design of its app. It also said yesterday that it would stop that test as a result of some of these disruptions.

04:40 Speaker A

And talk to me specifically about a component of Meta that I’m interested about, which is that 20% of Meta’s revenue comes from China. We had data overnight showing major signs of economic pain there. To what extent can Meta continue to beat earnings expectations if the Chinese economy continues to be under pressure?

05:08 Jasmine Enberg

I mean, Meta is heavily exposed to a pullback from Chinese advertisers. On the other hand, though, it does have a very strong base of domestic advertisers, specifically small and medium-sized businesses. That’s actually a group of advertisers that we’re seeing a lot of the other social platforms going after right now, as they’re looking to diversify their ad businesses. Snap is included in that, but we’re also looking at platforms like Pinterest, Reddit, and even X that are trying to court these small and medium-sized businesses. It’s also, or Meta also has a very strong performance, direct response advertising business. And as we head into periods of more economic volatility, more economic uncertainty, what we see is that all advertisers start to prioritize the lower funnel. They start to turn to platforms that are tried and true, like Meta, and that also provide consistent ROI.

06:29 Speaker A

I want to end a little bit more broad here because I was looking at a stat that one of our producers flagged this morning, showing that tariffs could ding US ad spend by as much as $10 billion. Top level here, who do you think is the biggest winner and who do you think is the biggest loser of that potential stat?

07:00 Jasmine Enberg

Well, this is looking at social ad spend, and again, you know, the tariffs continue to wreak havoc on the economy. What we will see is that Meta will fare much better than many of these smaller social ad players. Um, we are expecting that there could be a $10 billion drop in the market for the amount of spending we’re expecting to go to social ad platforms this year. But I think the really important takeaway from this graphic is that regardless of what happens in each of the three scenarios that we have proposed, social ad spending will still continue to see growth in 2025. And I think that’s just a broader reflection of how important social media has become to advertiser strategies, and the fact that social ads are incredibly easy to pull, but they’re also very easy to turn back on.

08:14 Speaker A

All right, Jasmine. Got to leave it there. Thank you so much. Appreciate it.