StockTok: European Regulators seek information on Meta-Google secret ad deal

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

TECHNICAL DIFFICULTIES: Meta Platforms (META) said in a post on X, “We’re aware that a technical issue is impacting some users’ ability to access our apps. We’re working to get things back to normal as quickly as possible and apologize for any inconvenience.”

TRIAL REELS: In an earlier release on Tuesday, Instagram said that Trial reels are a new way to try out content and see what performs best by sharing reels with people who don’t follow you….Instagram added, in part:…”we’re introducing trial reels, a new way to try out content and see what performs best by sharing reels with people who don’t follow you. If you’ve ever wanted to experiment with new ideas without worrying about how your followers might react, trial reels are the tool you’ve been looking for. Trial reels help take the guesswork out of how your content will perform. See If Content Resonates Before Sharing It With Your Followers… We often hear from creators that they feel nervous about posting too much or trying out content that’s outside of their niche on Instagram, for fear of it not resonating with their followers. Trial reels will be shown to non-followers first. Now, if you want to try out a new genre, storytelling format or topic, you can easily get a gut check on how your content might perform. If you feel good about a trial reel and how it’s performing, you can choose to share it with your followers with one tap or decide to set up the reel so that once the trial is over, if it’s performed well, it gets automatically shared with your followers. ”

SECRET AD DEALS: European regulators have asked Google (GOOGL) for more information about its now-scrapped secret advertising partnership with Instagram-parent Meta that ignored the search company’s rules on how minors should be treated online, The Financial Times’ Stephen Morris and Javier Espinoza reported. According to people familiar with the matter, commission regulators in October ordered lawyers for Alphabet to review and collate data, presentations, internal chats and emails related to the ad campaigns, and officials are currently deciding whether to act.

HALT REQUESTED: China-based ByteDance and its popular social media app TikTok have requested that an appeals court temporarily halt a law that would require ByteDance to divest TikTok by January 19 or face a ban in the U.S., pending an examination by the U.S. Supreme Court, Reuters’ David Shepardson wrote. The companies filed the emergency motion with the U.S. Court of Appeals for the District of Columbia, claiming that without the order the law will take effect and shut down the short-video app, the author notes.

ANSWERS: In a company blog post, Reddit (RDDT) said, “In line with our mission to empower communities and provide human perspectives to everyone, starting today, we’re rolling out a test of Reddit Answers, a new way to get the information, recommendations, discussions, and hot takes people are looking for – on any topic – from real conversations and communities across all of Reddit. With Reddit Answers, redditors can ask questions and receive answers using a new, AI-powered conversational interface. Once a question is asked, curated summaries of relevant conversations and details across Reddit will appear, including links to related communities and posts. Redditors can easily read relevant snippets and answers inline from real redditors, jump into the full conversations, and go deeper in their search with their own or suggested follow-up questions. People know that Reddit has answers, advice, and perspectives on almost anything they’re looking for, and AI-powered search is part of our longer-term vision to improve the search experience on Reddit – making it faster, smarter, and more relevant. Reddit Answers is initially rolling out to a limited number of users in the U.S., with support currently in English; we plan to expand to additional languages and locations in the future.”

METEORIC RISE: Global advertising spending is expected to exceed $1T in 2024, one year earlier than previously forecast, the Wall Street Journal’s Megan Graham reported, citing guidance by from WPP‘s (WPP) GroupM. The new forecast sees global ad revenue rising 9.5% over 2024, up from the previous view of 7.8%, as major ad sellers like Google, Meta Platforms, ByteDance and Amazon (AMZN) have seen significant gains.

CONTINGENCY PLANS: American content creators on TikTok asked followers to subscribe to their channels on rival platforms like Meta-owned Instagram and Alphabet’s YouTube after a federal appeals court ruled that the social media app could be banned if it is not sold to a U.S.-based company by January 19, Reuters’ Seher Dareen wrote. The U.S. Congress, fearing TikTok’s Chinese owners are gathering information about American consumers, has passed a law requiring its owner, Chinese-backed ByteDance, to divest its TikTok in the U.S. or face a ban. On Friday, a federal appeals court upheld the law. Although TikTok plans to appeal the decision, the possibility of a ban creates a significant engagement and monetization opportunity across the largest social platforms in the U.S., the Citi told investors in a research note. The firm highlighted Meta’s Instagram and Facenbook, Google’s YouTube, Snap (SNAP), Pinterest (PINS), and Reddit as potential beneficiaries. Engagement benefits are likely to be somewhat more gradual, but advertisers are likely to accelerate their spend off of TikTok as they invest in other platforms, says Citi. Meta remains its top pick across the internet sector.

LLAMA TEXT MODEL: Meta CEO Mark Zuckerberg said in a post on Threads that the company is releasing its Llama 3.3 70B text model, noting it performs “similarly” to its 405B model. The CEO also noted that Meta AI has nearly 600M monthly active users, and that it is building a 2GW+ data center to train future Llama models.

LIGHTSTORM VISION: Meta said in a blog post, “Sci-fi adventures. Star-crossed romances. Deep-sea documentaries. Filmmaker and explorer James Cameron is synonymous with all these genres and more. A pioneer in the merging of cutting-edge technology and blockbuster storytelling, Cameron has been at the forefront of innovation within the film industry for 40 years. And today, we’re thrilled to announce a new partnership between his venture, Lightstorm Vision, and Meta, to scale the creation of world-class 3D entertainment experiences spanning live sports and concerts, feature films, and TV series featuring big-name IP on Meta Quest-which will be Lightstorm Vision’s exclusive MR hardware platform… More people are using virtual and mixed reality headsets than ever before, opening up exciting new possibilities for immersive storytelling. Through our collaboration with Lightstorm Vision, we’re committed to moving media forward and to improving content creators’ ability to make high-quality stereoscopic content through the use of advanced tooling, including employing AI. And as a member of Stability AI’s Board of Directors, Cameron is uniquely positioned to contribute to the thoughtful and responsible use of AI in this space. Our goal is to make top-tier 3D content more accessible-both for creators to produce and for people to enjoy at home and on the go. Together with Lightstorm Vision, we’ll improve access to 3D production tools across the broader entertainment industry. In addition to co-producing original content, we’ll leverage Lightstorm Vision’s cutting-edge technology and production techniques to revolutionize the creation of stereoscopic media. Cameron and the team at Lightstorm Vision have been pushing 3D technology forward for more than three decades, earning recognition as the world’s leading experts in stereoscopy. We’re honored to be able to work alongside them to help lower the production costs associated with top-tier 3D content and deliver a steady stream of mainstream immersive shows. For more than a century, filmmakers have pushed the boundaries of storytelling. MR headsets represent the next step in the evolution of media, enhancing the viewing experience for millions, and utilizing native 3D in the service of traditional and immersive 360-degree environments, along with interactive elements that put you at the center of the story. We’re in the midst of a creative revolution as studios and individual auteurs explore this new frontier. We can’t wait to map the future with Lightstorm Vision and enable the next generation of global 3D content creators.”

CLEAN ENERGY CONTRACTS: Meta Platforms signed four contracts with Chicago-based energy owner, operator and developer, Invenergy, for 760 MW of clean energy. These new Environmental Attribute Purchase agreements bring Meta’s total clean energy procurement from Invenergy to over 1 GW. Meta’s EAPAs are contracted through four Invenergy-developed facilities strategically located across the U.S. to meet soaring energy demand with domestically produced electricity. These solar energy centers include: Hardin II Solar – 150 MW – Expected Commercial Operations 2024; Delilah II Solar – 150 MW – Expected Commercial Operations 2025; Tip Top Solar – 110 MW – Expected Commercial Operations 2026; Chalk Bluff Solar – 350 MW – Expected Commercial Operations 2027. The electricity from these projects will be delivered to the local grid, increasing regional reliability by delivering power to nearby homes and businesses, while Meta will receive clean energy credits for bringing new generation capacity online.

DAUS: Trump Media’s (DJT) Truth Social had 355,000 daily active users in November, up 3% month over month after Donald Trump won his second term as U.S. president, according to data from research firm Apptopia, Bloomberg’s Bailey Lipschultz reported. Traffic at the social media site remains small compared to its competitors, and while the monthly gain did outpace peers, the total user numbers still trail X’s by 400-times and Instagram’s Threads by a similar margin, the data show. Apptopia data also show that the average person who opens the Truth Social app on a smartphone spent 4.4 minutes there per day in November, while users scroll X, the platform formerly known as Twitter, for nearly 28 minutes per day.

OUTSOURCING: Meta is shifting part of the development and design of mixed reality headsets to Chinese manufacturer Goertek and moving half of production to Vietnam from China, The Information’s Kalley Huang, Wayne Ma, and Juro Osawa reported, citing sources.

ADDITIONAL ANALYST COMMENTARY: Needham analyst Laura Martin raised the firm’s price target on Reddit to $190 from $120 and kept a Buy rating on the shares. The firm increased estimates for Reddit’s Q4, fiscal 2025 and 2026 citing strong user and average revenue per user growth trends. The increased price target reflects the company’s stronger financial momentum expected over the next 24 months, the analyst tells investors in a research note. Needham says key areas driving Reddit’s growth in 2025 include higher search and shopping revenue, and higher international revenue. The firm also expects the overall markets and advertising demand to be stronger in 2025 versus 2024, driven by “more positive business sentiment.”

Wells Fargo initiated coverage of Reddit with an Overweight rating and $206 price target. The firm said that while the 91% post-Q3 earnings share outperformance reflects optimism following a strong print and guidance, it sees 33% upside to Street 2026 EBITDA estimates on advertising monetization upside. As such, it believes the shares are likely to outperform on continued positive estimate revisions. The market has yet to fully appreciate Reddit’s near-term monetization improvement opportunity despite the recent stock performance, the analyst told investors in a research note. Wells estimates 60% of Reddit engagement as monetizable, after excluding time spent on functions/content that disallow ad placements.

Piper Sandler downgraded Pinterest to Neutral from Overweight with a price target of $36, down from $41. The firm is moving to the sidelines following two quarters of “mixed prints.” For 2024, 20% revenue growth seems unlikely given the Q4 15%-17% guide and its Q1 will likely see growth in the low double-digit range, the analyst tells investors in a research note. Piper says its early read on Performance+ is mixed and as its advertising buyer survey suggests a competitive small-cap advertising field. With “unresolved questions” post the Q3 print, Piper downgraded the stock.

Piper Sandler increased its price target on Meta Platforms to $670 from $650 and keeps an Overweight rating on the shares following an advertising buyer survey. The firm says there is “still a lot to like” at Meta. Teen engagement with Instagram and FB Blue has been improving, which is “impressive” given Meta’s scale and existing brand, the analyst tells investors in a research note. Further, there is little question Meta has the best CEO in consumer internet, contends Piper. The firm says that although not evident in its survey work, it sees Meta as an artificial intelligence technology leader.

Morgan Stanley upgraded Reddit to Overweight from Equal Weight with a price target of $200, up from $70. The firm thinks it’s still early for Reddit’s platform as it expects its engagement and advertising pipelines to drive industry leading user, time spent and ad revenue growth. Looking ahead, it sees user and time spent per user growing, ad pricing rising and upside to ad load as well. Morgan Stanley also pointed out that its new price target has 23% upside, but the $300 bull case has about 85% upside.

Cleveland Research told investors in a note that feedback in its checks was “mixed” on Snap advertising trends in Q4 as the firm heard incremental weakness in brand advertising was weighing on the business. Checks also pointed to outlooks that were “more cautious” on further expected share loss to Meta and TikTok in 2025 as well as Reddit winning more test budgets, the firm said.