Advertisers are hitting the brakes—hard. That’s the message today from Snap, the first of the digital ad companies to report third-quarter earnings. A combination of Apple’s ad-targeting clampdown and knock-on effects from supply shortages are expected to sharply slow fourth-quarter ad growth, Snap executives warned. It was a sobering portent for Facebook, Alphabet and all other media firms reporting their earnings in the coming weeks.
And it’s a stunning reversal of fortunes for the digital ad market, which had been growing like gangbusters as recently as the second quarter. Investors certainly were caught flat-footed, judging from the 22% plunge in Snap’s stock price on Thursday—and smaller declines in both Facebook and Alphabet shares. But that’s forgivable given how quickly conditions have changed. Snap’s revenue growth had rocketed to 116% in the second quarter, nearly double the previous two quarters’ rate. In the third quarter it slipped back to 57%, we learned today. That was a little bit below what Snap had projected, but only slightly. More alarming was the company’s 30% growth projection for the fourth quarter.