Snap (NYSE:SNAP) just can’t seem to catch a break these days, as the struggling social media company finds its shares down again on Wednesday thanks to an advertising titan’s cautionary words about Snapchat.
Only one day after Morgan Stanley (NYSE:MS) downgraded Snap and lowered their revenue forecast for the company, the chief executive of advertising and communications power WPP (LON:WPP) made it clear that his clients will spend far more money on Facebook (NASDAQ:FB) and Google (NASDAQ:GOOGL) .
Sir Martin Sorrell spoke with CNBC Wednesday morning about global advertising spending and touched on how Snap has been copied effectively by some of its biggest rivals.
Sorrell’s company spent about $100 million advertising on Snapchat, and he said that number could leap to $200 million in 2017. However, WPP's spending on Facebook was about $1.7 billion last year—and it might balloon to over $2 billion this year. The company’s spending on Google could grow to over $6 billion this year.
"Snap obviously has been copied — plagiarized you could say — by Facebook, and very successfully so," Sorrell told CNBC.
“There has been a concentration on whether Facebook can successfully repulse Snap, and to date, it seems that they have… So what we will see is still significantly greater spending at Google and Facebook.”
It seems clear that Snapchat would not be able to command as much advertising revenue as Google or Facebook. However, since Snap’s business model relies almost entirely on advertising revenue, a global advertising player openly mentioning that Facebook effectively copied its product could prove jarring for investors.
Shares of Snap fell by nearly 2% in morning trading to hover just above its all-time low. Snap has bounced back a little since then, down around 1%. Still, Snap maintains a Zacks Rank #4 (Sell). The stock also sports an “F” grade for Value and a “D” grade for Growth in our Style Scores system.
More Bad News
On top of the negative news on the advertising front, the chief investment officer at Sloy Dahl & Holst didn’t mince words about investing in the young and downtrodden social media company.
Paul Meeks spoke with CNBC recently and touched on the fact that he thinks Snap jumped the gun on going public. Meeks mentioned that the company’s business model was far too new to file for an IPO. The CIO also talked about how vulnerable Snap was, and still is, to being copied by its bigger and more powerful rivals.
"I think Facebook is the one to buy, and if you think about Snap, slap yourself and just buy some more Facebook," Meeks said.
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