Snap gets downgraded because ad buyers prefer Instagram

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  • Snap shares lower after the company was downgraded by Cowen on Thursday.
  • The company ranks last in a number of important categories to ad buyers, like user targeting and return on investment.
  • Watch Snap trade in real time here.

Snap shares are falling, down 3.79% at $US14.82 apiece, after Cowen released a downgrade of the company on Thursday morning.

John Blackledge, an analyst at Cowen, released the results of his team’s survey of 50 senior ad buyers, and the big was that 96% of would prefer to buy ads on Instagram instead of Snapchat. Because of this, Blackledge downgraded Snap to “underperform” from “market perform,” and set a price target of $US11. That’s 26% below the company’s current share price.

When Blackledge asked the ad buyers to rank social media platforms by important metrics like return on investment, user targeting, and campaign measurement, Snap ranked last in every category.

The survey results come as Snap is working on rolling out its biggest redesign ever, which more clearly splits content from users’ friends from celebrities and brands. The redesign was planned to debut on December 4, but has yet to hit all phones.

The redesign also introduces an algorithmically sorted feed that hopes to increase engagement, and add new ad spots in the app. Snapchat’s users are still highly engaged, spending an average of 38 minutes a day on the platform.

Blackledge said that some of the ad buying disconnects come from the tendency for Snapchat to be more of a sharing platform, while Instagram users tend to view the platform as a place to consume content.

Snap is currently trading at 12% below its $US17 IPO price.

Read more about the planned redesign here.

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