Snap drops quarterly forecast due to economic risks

Snap Inc., the parent company of Snapchat, announced on April 29, 2025 that it will not provide a financial forecast for the second quarter due to ongoing economic uncertainty.

Following this announcement, the company’s shares dropped by 9% in extended trading.

The social media firm reported facing challenges in the current quarter.

This comes despite efforts to expand its advertiser base with small and medium-sized businesses and to grow its subscription services

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Tariffs historically redirect ad budgets toward performance-focused channels

Economic uncertainty from tariffs has consistently affected advertising budgets, with direct response advertising becoming more critical during these periods.

Snap’s shift to direct response ads (reaching 75% of total ad revenue) reflects historical patterns where marketers prioritize measurable returns during economic instability.

Previous tariff implementations led to decreased consumer spending and businesses seeking more cost-efficient marketing channels, with predictions of roughly $1,000 in additional annual costs per household during the 2019 tariff implementation 1.

The 60% growth in Snap’s advertiser base, particularly from small and medium businesses, reflects how smaller companies diversify advertising platforms during economic uncertainty to optimize limited budgets.

This pattern aligns with previous economic downturns when marketers shifted budgets away from brand awareness campaigns toward performance marketing that could demonstrate immediate ROI.

2️⃣ Platform hierarchy becomes more pronounced during economic uncertainty

Snap’s decision not to issue a forecast reflects the historical vulnerability of smaller platforms during economic contractions when ad dollars consolidate toward market leaders.

TikTok leads the industry with 118 minutes of daily watch time per user, while Meta’s Reels exceeds 200 billion plays daily across Facebook and Instagram, creating formidable competition for advertising budgets during uncertain times 2.

Previous economic downturns have shown advertisers typically reduce experimental spending first, prioritizing platforms with the largest reach and most established performance metrics.