Shares of Snap slumped 17% in premarket trading after the company released a disappointing forecast, highlighting the ongoing struggles in the digital advertising market. Analysts expressed concerns about Snap’s capacity to compete with larger rivals such as Meta and Google. The forecast for the third quarter fell below market expectations primarily due to a decline in advertising demand from consumer discretionary sectors, which have been particularly weak.

Rohit Kulkarni, an analyst at Roth MKM, stated that there is a lack of confidence in Snap’s management’s ability to deliver consistent results. This skepticism reflects a broader trend within the digital advertising landscape, where giants like Meta, Google, and TikTok dominate. Snap has found it increasingly challenging to carve out a significant market share.

Snap’s Chief Financial Officer, Derek Andersen, indicated that the second quarter’s results were disappointing, notably due to declines in sectors like technology, entertainment, and retail. This has severe implications for Snap, which relies almost entirely on advertising revenue.

If the premarket losses persist, Snap risks losing over $3.5 billion in market value. The stock has shown volatility in response to earnings reports, previously swinging significantly in both directions. In contrast, Meta reported robust advertising demand and positive outlooks, reinforcing Snap’s position as a struggling player in the industry. Analysts believe that while Snapchat possesses immense potential, it still has considerable hurdles to overcome before achieving significant growth.