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Meta Platforms stock (NASDAQ:META) was one of the top movers to the downside in Communication Services Friday, -1.7%, after Edgewater Research pointed to some ongoing “elements of weakness” in the company’s ad performance.
“Once again [direct response] campaign efficiency remains under pressure across much of our META work, and the mix of contacts that are seeing this weakness expanded further in June compared to our last updates in May and April,” analysts Joe Wittine and Nick Koontz wrote.
The analysts note that from a quantitative perspective, 13 of 29 META calls showed contacts flagging weaker than expected conversions in June and early July in places.
The trends are most apparent in META’s core direct-to-consumer/e-commerce channel, they pointed out.
That could be interpreted as a weakening consumer that is “doing more window shopping, getting choosier on discretionary purchases, and demanding price promotions before pulling the trigger,” they wrote. But it could be due to auction dynamics, particularly supply limitations — which would also help explain why weakness is “more concentrated” at META than at Alphabet (GOOG) (GOOGL), or at Snap (SNAP) and Pinterest (PINS), which are “for now staying above the fray.”
Agencies are generally saying June META spend is about 10% below expectations, for brands that are underperforming.
There are a number of relative positives, they noted, including that Q2 is naturally volatile for e-commerce sellers as consumers prioritize things like travel; that some big advertisers did see early July improvement; Meta’s return on ad spend is still outperforming Snap, Pinterest and paid social rivals like TikTok (BDNCE); most vertical-level feedback outside of e-commerce is positive, including travel, B2B and financials; and Meta is doing particularly well on mobile ad install campaigns on iOS.
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