For the second time in the past month, a popular celebrity has torched Snap’s stock with a public complaint.
Celebrities keep hurting Snap’s stock price — this time over an inappropriate ad
Rihanna isn’t happy with Snap, and the stock is down. But the company is also dealing with an advertising problem.
Last month, it was Kylie Jenner who tweeted that she “[does] not open Snapchat anymore,” an admission that some believe caused Snap’s stock to drop more than 6 percent.
On Thursday, it was pop star Rihanna, who blasted Snap for allowing an inappropriate ad that asked users if they would rather “slap Rihanna” or “punch Chris Brown.” The ad would be inappropriate regardless, but you may also recall that Rihanna was the victim of domestic violence while dating Brown almost 10 years ago.
“Now SNAPCHAT I know you already know you ain’t my fav app out there!,” she posted Thursday. “But I’m just trying to figure out what the point was with this mess! I’d love to call it ignorance, but I know you ain’t that dumb!”
Snap apologized for the ad, calling it “disgusting,” and blocked the advertiser who posted it.
“This advertisement is disgusting and never should have appeared on our service,” the statement reads. “We are so sorry we made the terrible mistake of allowing it through our review process. We are investigating how that happened so that we can make sure it never happens again.”
The damage was done, though: Snap stock is down almost 5 percent on the day.
There are a few things to consider here.
The first is that celebrities seem to have an incredible impact on Snapchat’s business. These celebrity comments, while not happening in a vacuum, also seem to have a disproportionate impact on Snap’s stock.
It seems clear that investors are still trying to understand Snapchat themselves, a product still dominated by teen users. If you don’t use a product, a celebrity endorsement (or condemnation) goes a lot further than it would otherwise.
Snapchat
Snap is also still establishing itself as a business and a public company. Can you imagine a single tweet or statement from any celebrity hurting Facebook’s stock? Facebook has been bashed by every politician and news organization in America for the past 18 months. Its stock is up almost 60 percent since the start of 2017. That’s because Facebook’s business is solid and proven, and investors aren’t overreacting to every new piece of information.
But there is also a legitimate issue here with Snapchat’s ad content: The quality of the ads isn’t always very high. This Rihanna ad is a perfect example, but there are others, like this ad for cryptocurrencies or an ad one user sent us for Ashley Madison, the dating site for people looking to have an affair.
This is usually what happens when you sell ads programmatically, or through software programs that don’t always require human moderation. Facebook deals with this issue, too, and so does Google. But their businesses are much bigger, and people are more immune to their stumbles.
Surprisingly, though, you can’t blame the algorithms for crummy Snap ads. The company still uses human moderators to approve the vast majority of ads, according to a company spokesperson. Only a small group of pre-approved advertisers can buy ads without a human approving them first.
Which means that Snap may not be suffering from a technology problem so much as a human problem, at least in the Rihanna case. But the issue also underscores Snap’s need to grow its pool of advertisers. If there were more ads to choose from, it’s likely these low-quality ads wouldn’t make it to the top of the pile.
This article originally appeared on Recode.net.
