Welcome to "#SocialStocks," The Fly's weekly recap of Wall Street's reactions to social media stock news.
DATA COLLECTION POST ATT CHANGES: Facebook (FB), Snap (SNAP), and other iOS developers continue to collect anonymized and aggregated data on users for targeted ads, despite Apple's (AAPL) ATT changes, The Financial Times' Patrick McGee reported. Apple has reportedly allowed app developers to collect the data from its 1B iPhone users for targeted advertising, in an overlooked shift that enables companies to loosely interpret its privacy policy. Snap has told investors that it plans to share data from its 306m users including those who ask Snap “not to track” in an effort to provide a better view for advertisers on how ad campaigns are working. The company claims personal data will first be omitted and aggregated. In the same vein, Facebook COO Sheryl Sandberg said Facebook is taking part in a “multiyear effort” to rebuild ad infrastructure “using more aggregate or anonymized data”.
THIS CONTENT HAS BEEN FLAGGED: Twitter (TWTR) said it is testing an overhauled reporting process that "will make it easier for people to alert them of harmful behavior." "The new approach, which is currently being tested with a small group in the US, simplifies the reporting process," the company said. "It lifts the burden from the individual to be the one who has to interpret the violation at hand. Instead it asks them what happened. This method is called symptoms-first, where Twitter first asks the person what's going on. Here's the analogy the team uses: say you're in the midst of an emergency medical situation. If you break your leg, the doctor doesn't say, is your leg broken? They say, where does it hurt? The idea is, first let's try to find out what's happening instead of asking you to diagnose the issue." While the process is still being tested, Twitter is hoping the chain of reactions following flagged content will help inform a more complete process. “This report essentially triggers a review of the content. If Twitter determines that the content is violating and our rules dictate that the content be removed, that will happen,” said Fay Johnson, Director of Product Management on the Health team. “We'll do some additional investigation to see if there are other things that we need to take down based on what was reported, whether it be the content itself or an account.” A wider rollout of this system is expected in 2022. “It helps us address unknown unknowns,” said Johnson. She and fellow product managers Anastasia Konecky and Jarrod Doherty are leading the rollout for the new process. “Obviously we want to have rules that help keep everyone safe while balancing freedom of speech and promoting the public conversation. We also want to make sure that if there are new issues that are emerging — ones that we may not have rules for yet — there is a method for us to learn about them,” said Johnson. “The intention of these reporting flows is to empower the customer, give Twitter actionable information that we can use to improve the product and our experiences, and also improve our trust and safety process overall.”
M&A: Pinterest (PINS) announced it has acquired Vochi, a video creation and editing app focused on democratizing tools for creators. The company said, "Acquiring Vochi is part of our commitment to helping creators bring more quality video content to Pinterest. Having more inspiring content can provide Pinners with more ways to watch, make and shop creator ideas...Vochi was founded in 2019 by Ilya Lesun, Anna Buglakova, Vasily Kasnitsky, Sergey Malyutin and incubated by Andrei Avsievich and Yury Melnichek from Bulba Ventures...The Vochi app will continue to be available as a standalone app for now. We're looking forward to working with the Vochi team and building more innovative creator tools together. Financial terms of the deal were not disclosed."
In a tweet, Nick Caldwell, general manager for core tech at Twitter, said, "Excited to share that today we're welcoming @QuillChat to Twitter! .@ludwig and his talented team built Quill as a fresher, more deliberate way to communicate. We're bringing their experience and creativity to Twitter as we work to make messaging tools like DMs a more useful & expressive way people can have conversations on the service. We’re thrilled to have them onboard and can’t wait to see what we accomplish together. Welcome to the flock, team!
TEEN SAFETY MEASURES: In a blog post, Instagram head Adam Mosseri said, "At Instagram, we've been working for a long time to keep young people safe on the app; as part of that work, today we're announcing some new tools and features to keep young people even safer on Instagram. We'll be taking a stricter approach to what we recommend to teens on the app, we'll stop people from tagging or mentioning teens that don't follow them, we'll be nudging teens towards different topics if they've been dwelling on one topic for a long time and we're launching the Take a Break feature in the US, UK, Ireland, Canada, Australia and New Zealand, which we previously announced. We'll also be launching our first tools for parents and guardians early next year to help them get more involved in their teen's experiences on Instagram. Parents and guardians will be able to see how much time their teens spend on Instagram and set time limits. And we'll have a new educational hub for parents and guardians."
NEW CEO, NEW TEAM: In a regulatory filing, Twitter disclosed that CEO Parag Agrawal is restructuring the leadership team "to drive increased accountability, speed, and operational efficiency," shifting to a GM model for Consumer, Revenue, and Core Tech, which will be led by Kayvon Beykpour, Bruce Falck, and Nick Caldwell, respectively. "These GMs will lead all core teams across engineering, product management, design, and research. Lindsey Iannucci also joined the leadership team as Chief of Staff and Vice President of Operations to support Mr. Agrawal in strengthening operations across the leadership team, and the company," the filing stated. Twitter announced that as part of the organizational changes referenced, Michael Montano, Engineering Lead, will be stepping down from his position at the company effective December 31, 2021. Montano will remain an advisor of the company through the end of the first quarter of 2022 to ensure an orderly transition. Also as part of these changes, Dantley Davis, Design and Research Lead, will be stepping down from his position at the company effective December 31, 2021, and will remain an advisor through the end of the first quarter of 2022 to ensure an orderly transition.
DELETE YOUR ACCOUNT: Yesterday, Twitter disclosed an additional 3,465 accounts to its archive of state-linked information operations. The account sets include eight distinct operations the company has attributed to six countries - Mexico, the People's Republic of China, Russia, Tanzania, Uganda, and Venezuela, respectively. Every account and piece of content associated with these operations has been permanently removed from the service. "In addition, we have shared relevant data from this disclosure with three leading research partners: the Australian Strategic Policy Institute (ASPI), Cazadores de Fake News, and the Stanford Internet Observatory (SIO)," Twitter said. "In most instances, accounts were suspended for various violations of our platform manipulation and spam policies."
ANALYST COMMENTARY: HSBC analyst Nicolas Cote-Colisson upgraded Meta to Hold from Reduce with an unchanged price target of $300. The shares are under pressure after a "regulatory setback," despite upside risks on advertising and rising interest in metaverse, Cote-Colisson told investors in a research note. The analyst says the Meta investment case "remains a fragile balance between risks of more regulation and new business opportunities" With the stock down 19% since the September 7 peak, Cote-Colisson upgrades the shares to Hold on valuation. He believes the share price now better reflects Meta's risks. UBS analyst Lloyd Walmsley assumed coverage of Meta with a Buy rating with a price target of $425, up from $416. The company is positioned to benefit from better operating performance and multiple expansion following the reset of Q3 results, the analyst said. Ad checks tell us budget cuts specific to ATT/ privacy headwinds were swift, and as ad tech improvements hit, budgets are expected to return quickly, Walmsley added, stating that he sees additional upside potentially coming from Reels, Watch and eCommerce functionality.
Piper Sandler analyst Thomas Champion lowered the firm's price target on Twitter to $54 from $70 and reiterates a Neutral rating on the shares after conducting a survey of 1,500 people in the United States to better understand the company's usage. Overall, user growth in the U.S. may be hampered by churn while advertising relevancy turned out better than expected and subscriptions "look appealing to a narrow audience," Champion told investors. The survey suggests Twitter's user growth opportunity in the U.S. remains as 60% of respondents have not used the platform, says the analyst. However, he believes that with gross adds and churn evenly matched in the most recent period, the setup for Twitter's growth looks challenging. Walmsley assumed coverage of the stock with a Neutral rating with a price target of $50, down from $69. Twitter's 2023 targets look increasingly like a stretch and will serve as an overhang on shares, the analyst tells investors in a research note, though he also "sees evidence" that Twitter is executing on new product development at a faster clip than historical levels. Consensus estimates look ambitious, but risk-reward appears balanced on the stock, Walmsley added.
Walmsley downgraded Pinterest to Neutral from Buy with a $42 price target after assuming coverage of the name. The analyst's estimates are below consensus on Pinterest revenue and user growth due to evidence of continued app usage declines, "deteriorating" advertising checks and a "suspect product pivot." Walmsley told investors in a research note that if Pinterest cannot turn around user and revenue growth, the stock's multiple will continue to re-rate lower, with almost 30% risk to the multiple in a bear case.
Lastly, Walmsley assumed coverage of Snap with a Buy rating and $67 price target. Having spoken with many digital ad buyers, the analyst states that he has come away encouraged in intension to increase budget on Snapchat in general, and on its AR ad units in particular. Walmsley noted that he is positive on the stock and its expected estimate revisions driven by scaling AR advertising revenue, opening up ad inventory on the Spotlight screen, and strong DAU growth on the back of continued product innovation.
