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#SocialStocks: NYC files lawsuit against five social media companies

Posted February 15, 2024 at 10:45 am
Andrew Perez
The Fly

Zuckerberg unimpressed with Apple Vision Pro, Trump-tied SPAC close to $50M in financing and other notable stories from this week

Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.


New York City Mayor Eric Adams, New York City Corporation Counsel Sylvia O. Hinds Radix, New York City Department of Health and Mental Hygiene Commissioner Ashwin Vasan, NYC Health + Hospitals President Michell Katz, and New York City Department of Education Chancellor David C. Banks announced the filing of a lawsuit to hold five social media platforms – TikTok, Instagram, Facebook (META), Snapchat (SNAP), and YouTube (GOOG) – accountable for fueling the nationwide youth mental health crisis. The city is joining hundreds of school districts from across the country in filing litigation seeking to force tech giants to change their behavior and to recover the costs of addressing this public health threat. The city spends more than $100M on youth mental health programs and services each year. To help address this ongoing crisis and the harm caused by these platforms, Mayor Adams also released a social media action plan, “New York City’s Role in the National Crisis of Social Media and Youth Mental Health: Framework for Action, to hold social media companies accountable, provide education and support to young people and families, and study the long-term impacts of social media on youth. Today’s announcement builds on the Health Commissioner’s Advisory that DOHMH Commissioner Dr. Vasan issued last month, identifying unfettered access to and use of social media as a public health hazard, just as past U.S. surgeons general have done with tobacco and firearms. The advisory provides recommendations to parents and caregivers, health care providers, educators, and policymakers on actions that can be taken to protect children, including the recommendation to delay social media use until the age of 14. “Over the past decade, we have seen just how addictive and overwhelming the online world can be, exposing our children to a non-stop stream of harmful content and fueling our national youth mental health crisis,” said Mayor Adams. “Our city is built on innovation and technology, but many social media platforms end up endangering our children’s mental health, promoting addiction, and encouraging unsafe behavior. Today, we’re taking bold action on behalf of millions of New Yorkers to hold these companies accountable for their role in this crisis, and we’re building on our work to address this public health hazard. This lawsuit and action plan are part of a larger reckoning that will shape the lives of our young people, our city, and our society for years to come.”


In a video posted to Instagram, Meta CEO Mark Zuckerberg shared his thoughts on Apple’s (AAPL) new mixed-reality headset Vision Pro, stating Meta’s Quest 3 headset is “the better value” and “the better product, period.” “It seems like there are a lot of people who just assumed that Vision Pro would be higher quality because it’s Apple and it costs $3,000 more, but honestly, I’m pretty surprised that Quest is so much better for the vast majority of things that people use these headsets for, with that price differential,” Zuckerberg said.

Separately, Immersion (IMMR) announced that it has signed a license with Meta to make Immersion’s patents available to Meta and its affiliates’ hardware, software, VR, and gaming products. “We are delighted to grant Meta Platforms, Inc. a license to our patents for haptic technologies. We are excited to license Meta Platforms, Inc. for their delivery of high-quality haptics in their devices,” said Eric Singer, Immersion’s President and CEO. Immersion’s high-quality touch feedback technology enhances gaming peripherals and applications. Increasingly, haptics is being designed into VR gaming applications as more and more VR platforms and games incorporate high-quality tactile effects for more immersive operations


Sprout Social (SPT) announced the launch of Social Customer Care by Sprout Social, advancing the platform’s care offering with comprehensive case management solutions, AI-powered capabilities and robust reporting. Care by Sprout empowers brands to provide exceptional customer experiences and drive lasting loyalty with fast and meaningful customer engagement. “Social is no longer just one aspect of customer care, it’s the determining factor of an impactful care strategy and, more importantly, lasting brand success,” said Justyn Howard, CEO of Sprout Social. “Consumer expectations on social media are skyrocketing, and a brand’s ability to provide quick, personalized responses across social platforms is critical to meeting and exceeding those needs. This has placed growing pressure on an organization’s care team, and we’ve been focused on delivering a platform that not only supports their efforts, but inspires their strategies and creates immense competitive advantage.”


Meta announced Friday: “We want Instagram and Threads to be a great experience for everyone. If you decide to follow accounts that post political content, we don’t want to get between you and their posts, but we also don’t want to proactively recommend political content from accounts you don’t follow. So we’re extending our existing approach to how we treat political content – we won’t proactively recommend content about politics on recommendation surfaces across Instagram and Threads. If you still want these posts recommended to you, you will have a control to see them. These recommendations updates apply to public accounts and in places where we recommend content such as Explore, Reels, In-Feed Recommendations and Suggested Users – it doesn’t change how we show people content from accounts they choose to follow. If political content – potentially related to things like laws, elections, or social topics – is posted by an account that is not eligible to be recommended, that account’s content can still reach their followers in Feed and Stories… We’re always working to improve our recommendation systems and give people control so we can connect people with the most relevant posts to them. We’ll roll out these changes slowly over time to get this right.” Some news creators and journalists, who moved to Threads from X, are criticizing Threads parent Meta for planning to stop recommending political content on Instagram and Threads, The Washington Post’s Taylor Lorenz and Naomi Nix noted.


Cathie Wood’s ARK Investment bought 1.14M shares of Pinterest (PINS) last week.


Digital World Acquisition Corp, (DWAC) the SPAC that has agreed to take former U.S. President Donald Trump’s Truth Social public, is close to a $50M financing deal, Reuters’ Anirban Sen reported, citing people familiar with the matter. The agreement, which could be announced in the coming days, is based on convertible notes and would help the blank-check company as it seeks to complete its tie-up with Trump Media & Technology Group, owner of Truth Social.


Sprout Social announced it entered into an enhanced partnership with Reddit, where Sprout users will gain access to deeper and more valuable real-time Reddit data for insights into public conversations and customer activity along with brand and industry trends. “Reddit has always been a central community for a wide and diverse range of conversations and we’ve seen it have an increased impact on brand outcomes in recent years,” said Justyn Howard, CEO of Sprout Social. “As social insights become essential to remaining competitive and driving innovation across an organization, this expanded offering will provide increased value to our users and their understanding of their businesses and customers.”


Meta Platforms has challenged a supervisory fee of 0.05% of its annual international net income which is meant to cover EU regulators’ costs of monitoring compliance under the new European Union rules, Foo Yun Chee of Reuters wrote. The European Commission said the Digital Services Act, or DSA, only applies to 20 large online platforms, including Meta, Google, TikTok and Apple. Meta said it disagrees with the method used to calculate the fees and has challenged the levy at the General Court, Europe’s second highest.


Pinterest reported mixed fourth quarter results last week and provided Q1 revenue guidance in line with consensus estimates. The company considers itself unique in the fact that there is alignment between users and advertisers. “We had a strong Q4, bookending a transformative year for Pinterest,” said Bill Ready, CEO of Pinterest. “2023 was our most productive year yet as we accelerated our product velocity and launched more solutions than ever before. Brands are responding by using our full suite of products to drive even better campaign performance. Pinterest is the rare business where the interests of users and advertisers are aligned. It’s proven to be true as we continue to post double-digit revenue growth and have achieved an all-time high for global MAU. The changes we made have set us up to be a stronger and more efficient company as we double down on our momentum in 2024.”

During its earnings conference call, the company disclosed third party ad integration with Google. CEO William Ready stated: “Today, I’m pleased to announce our next third-party ad integration with Google. This partnership will focus on monetizing several of our currently unmonetized international markets by enabling ads to be served on Pinterest via Google’s Ad Manager. We went live a couple of weeks ago, and this is starting to ramp. Third-party ad demand is scaling as we anticipated. And while it was not a significant revenue contributor in Q4, we are now seeing it contribute more meaningfully to our growth this quarter, and we expect that to continue going forward.” Shares of Pinterest were down 7.5% or $3.05 at $37.67 after the conference call commentary last week. Shares had initially traded down by over 20% following the company’s Q4 results.

Seaport Research raised the firm’s price target on Pinterest after the company reported “solid though in line” revenue growth for Q4 and also reported in line guidance for Q1. Pinterest also announced the addition of Google as a third-party ad partner for some of its international markets, notes the analyst, who remains positive on Pinterest shares given it has a unique platform with high intent users, the firm expects continued strong engagement trends and the company remains early in monetization, particularly internationally.


Tigress Financial increased its price target on Meta. Meta continues to benefit from ongoing AI-driven digital advertising strength and greater operating efficiency and its strong Q4 results and increased Q1 guidance continue to be driven by broad-based advertising demand across all of its platforms, especially online commerce and gaming, the analyst tells investors in a research note. Tigress believes further upside in the shares exists.

Morgan Stanley raised the firm’s price target on Pinterest. Topline results and guidance were “largely in line” with the firm’s estimates, but missed “elevated investor expectations,” the analyst said. The firm still sees robust execution as “already priced” and sees a tactical risk that is skewed to the downside without faster execution, the analyst added.

Redburn Atlantic raised its price target on Pinterest. The company’s Q4 revenue missed expectations and Q1 sales guidance was only in-line, but “there remains much to like about Pinterest,” the analyst tells investors in a research note. The firm said the company has significant user growth momentum while progress continues to be made in converting Pinterest from a brand-oriented platform to a direct response-oriented one.

Deutsche Bank lowered the firm’s price target on Snap. Given the 90% rally in the stock since the Q3 earnings report, and buy-side estimates well above the Street, Snap reported a disappointing Q4 print, with Q1 revenue and EBITDA guidance that missed expectations, the analyst tells investors in a research note. The firm says that while the turnaround story is now slower, the guidance for advertising revenue growth re-acceleration is a relative positive. It appears that Snap’s advertising turnaround is taking longer than we had anticipated, contended Deutsche Bank.

Originally Posted February 14, 2024 – #SocialStocks: NYC files lawsuit against five social media companies

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