The social setback put a damper on much of the market's overall mood. The tech-laden Nasdaq was down about 2.5% Tuesday. The S&P 500 dipped nearly 1% and the Dow was flat.
Twitter (TWTR), which may or may not be acquired by Tesla (TSLA) CEO Elon Musk - the deal is currently on hold - fell 5% as well. GAMING NEWS is now down nearly 35% from Musk's original buyout offer price of $54.20 a share.
Investors in social media stocks are clearly nervous that advertisers may be pulling back on marketing spending due to a litany of concerns.
Russia's invasion of Ukraine has led to skyrocketing oil and gas prices around the globe. In addition to higher energy costs, inflation pressures are also putting a dent in corporate spending. The recent uptick in Covid cases in China is another worrisome sign for businesses and consumers.
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Snapchat in particular has also been hurt by the rising popularity of TikTok and other emerging social media services that younger users have been flocking to, such as Discord and Amazon (AMZN)-owned video game streaming platform, Twitch.
Social media companies have been grappling 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.
The advertising landscape has analysts concerned, too. Wells Fargo analyst Brian Fitzgerald said in a report Tuesday that "a broad ad market recession appears increasingly likely."
JMP Securities analyst Andrew Boone cut his price target on Snapchat Tuesday, saying that "the advertising environment is worsening and we have no clear view that this is the bottom."