Social media companies were facing issues after the cutoff in digital ads due to the rising inflation effects, supply chain problems, and the war in Ukraine. The stock prices of the companies are getting hampered which is predicted to be high in the second quarter of the year.

The situation was prior to the warning given by the CEO of Snap- Evan Spiegel, on Monday when the guidance was already disappointing.

Evan Spiegel shocked the digital ad industry by communicating to employees and Wall Street that the micro-environment has become progressively worse at a faster pace than we anticipated prior to the issued guidance last month.

Snap, which had recorded second-quarter growth of 20% to 25%, lost 43.1% of its market cap on Monday. Apart from that, Pinterest fell 23.6%, Facebook parent Meta dropped 7.6%, Google lost 5% and Twitter dropped 5.6%.

Effect of Inflation

Among remarkable decliners, Trade Desk Inc. lost at 19%, fuboTV Inc. lost 7%, Magnite Inc. lost 13%, LiveRamp Holdings Inc. sank 8%, Roku Inc. dropped 14%, and Vizio Holding Corp. sank 10%.

In addition to the above decliners, Omnicom Group Inc. fell 8.4% and Interpublic Group of Cos fell 4.9%. Snap on Tuesday has mentioned that it was the biggest declined day ever.

Piper Sandler analyst Tom Champion said at this point of stage, our understanding says that this is more macro and industry-driven rather than Snap specific.

Stock sentiments

Snapchat has suffered a lot due to the increasing popularity of TikTok and other emerging social media services that younger users are using, such as Discord and Amazon (AMZN)-owned video game streaming platform, Twitch.

Social media companies have been dealing with the negative impact on advertising revenue triggered by privacy changes from Apple (AAPL) for users of iPhones and other devices running on the iOS platform.