i was wrong

oh man Twitter just got whacked with a

big Miss oh it's dirty folks but we

gotta talk about something in this video

that kind of relates to Twitter about

how I was wrong let's get into it and I

don't like being wrong but I'll be

honest with you about it let's go I

thought that we would go into 2022

seeing a massive increase of inventory

so that his companies would see Supply

chains loosen up we would see Freight

speed up we would see over ordering and

all of a sudden people who had already

bought the stuff they wanted to buy

wouldn't need to buy as much stuff

anymore so stores would have tons of

excess inventory and would have to cut

prices contributing to a decline in

inflation like what we're seeing at

Target and Walmart at the same time when

companies have a lot of product lots and

lots of product what I thought we would

see is we would actually start seeing

companies advertise a lot again that's

because when you don't have a product to

sell you don't need advertising thing

right think about that for a moment

logically if you are running a lemonade

stand and that's what you're selling and

you have five cups of lemonade that you

can sell but you have demand for let's

say 20 cups of demand well then the only

thing you could do is raise the prices

for the five cups and hope to make a

little bit more to your bottom line but

you're still missing out on a bunch of

excess demand a lot of customers are

upset because there's so much demand but

you don't have the supply so guess what

you're not doing you're not advertising

to get people to come to your lemonade

stand because you don't need more demand

you've got enough of that so it was

logical to me that as soon as we saw

Supply catch up and maybe we got to 50

cups of lemonade with 20 cups of demand

maybe then what we would see is this

transition back to ads and so my thought

was that in 2021 people didn't people in

companies really didn't need to

advertise much because we didn't have

enough stuff and in 2022 we were

supposed to have lots of stuff and then

have to advertise more to be able to

sell that stuff because if you have more

cups there are a few things you can do

you can drop the prices to increase

demand or you could advertise more to

bring in more customers to increase

demand or a combination of both usually

companies do a combination of both a

combination of advertising a combination

of uh you know reducing prices and being

competitive with promotions you know

promotions are always fun because they

they give people good deals like the 50

off coupon code on the programs on

building your wealth that expires on the

28th but you already know about the 28th

and lifetime access and the discounts

and all the amazing things you can learn

with our analyzes and our live streams

together but anyway let's talk now about

why I was wrong so I thought that in

2022 we would see see more advertising

spending unfortunately that was

predicated on their only being about a

twenty percent chance of a recession or

a prolonged downturn uh obviously I was

very wrong about that in the summer of

2021 I thought we only had a 10 to 20

percent chance of like any kind of

prolonged downturn uh it was obvious

that the insane like opium that we saw

in November and Euphoria and stuff

wasn't going to last but I don't think

anybody in the summer of last year was

like oh yeah we're knocking on the door

of a recession uh with the exception of

you know some element of like I mean

maybe right like there's gonna be a

tightening cycle at some point in the

future but the stock market really seems

to get so focused on like what's

happening or going to happen in the next

three to six months sometimes we lose

sight of that longer term risk of oh

well there could be a recession of

course so that's why at the beginning of

the year when we're like oh crap we

actually might be facing a recession I

realized dang it advertising is not

going to be the gameplay for 2022 so I

was wrong because I was wrong in the

thesis that we wouldn't have a prolonged

downturn we had a prolonged downturn

okay so what's happening with

advertising well it's not good it's

really not good and what I want to help

you see with advertising is This

Disaster scramble that a company that

just reported is going through and I

don't use this service I don't use

Snapchat I don't invest in this company

but I like to learn from companies that

even ones that I don't use or invest in

just to see what I can take away from

them and so I'm going to give you some

really quick bottom lines here I don't

want to get too nuanced because I think

sometimes I lose people in the sheets

and not everybody loves going into the

sheet so much so Snapchat Snapchat's a

company that's been losing money hand

over fist in the last quarter here they

lost 422 million dollars now the thing

about Snapchat though is for some reason

they raised so much freaking money the

they're actually really well capitalized

their capitalization is so good they've

got about six billion dollars in cash

and one billion dollars in current

liabilities which really gives them five

billion dollars to just keep losing

money with uh and this isn't supposed to

be just a snap video but I just want to

show you that's a five billion dollar

Coffer to go burn if you need 400 ml per

quarter they say they expect Q3 revenues

to be flat year over year which is

terrible this is a company that's losing

money their growth is stagnating and

they're slowing and they're trying to

figure out how do we get advertising

fixed keep this in mind this gives them

about uh what is that that's uh five

divided by 400 mil this gives you about

12 quarters or three years of cash that

they can burn at this rate of course it

becomes a problem if they keep spending

more money in their advertising Revenue

goes down but this is where we can look

at the snap earnings call to try to

understand a little bit more about

what's going on in the advertising space

and I think it's critical for other

advertising stocks as well including

Netflix and trade desk or Google or

Microsoft or really any company that you

might be investing in that's exposed to

ads especially after the Apple disaster

now this is the earnings transcript I

got it from Seeking Alpha which right

now if you go to metcaven.com Seeking

Alpha you'll actually get the best

possible pricing with an over 50 well

it's actually 50 off they're matching

the coupon code that I'm giving to

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courses so go to metcaven.com Seeking

Alpha to sign up for their premium

subscription and you'll get access to

all these transcripts as well super easy

to use and a lot less expensive than

like the Bloomberg term right but I want

to talk about this look at this let's

talk about the macro environment you

stated that Q3 is roughly flat is thus

far and so what they're noticing and

let's go to some of the conclusions here

what they're noticing at Snapchat is

right here we're observing a fairly

steady deceleration in advertising

demand over the last year Ah that's a

little bit of a problem a little bit of

a red flag especially in the advertising

space they're saying we're seeing these

various headwinds put pressure on the

earnings of a wide variety of companies

and this is directly impacting the

demand for advertising so in other words

the macro pressures we're seeing whether

it's less consumer demand or inflation

or whatever are making it harder for

companies to remain profitable other

companies that would ordinarily be

advertising but what they're doing is

they're actually one of the first things

they're cutting is advertising in a bull

market my thesis would have been right

companies would have spent more money on

Advertising but we went into a bear

market and look at what snaps telling us

one of the first things to actually get

cut is advertising that's because

advertising is one of the very few line

items in a company's cost structure that

can be reduced immediately it's a really

interesting thing to think of and in my

opinion it also makes you want to start

thinking about coming out of the

recession right because if we come out

of the recession and whether we're in

one now or we're going to go in one or

it's going to be close to one when we

rotate out of the recession you're going

to want to pay attention to companies

like financials but also advertising

companies because like they say here

that advertising can get ramped up very

very quickly the problem is when you're

on the downside of that slope it's

really easy to turn it off very quickly

right so bummer uh and again was wrong

we also know that a trade desk they uh

they did not end up getting the Netflix

contract which was a big bummer that was

a big deal uh that they even hinted

about right over here in the trade desk

earnings call where uh you know Netflix

was talking about uh uh you know

essentially having a straight publisher

about people that can do all the ad

matching or whatever and there was this

almost suggestion that uh a trade desk

would be one of those companies that

that could be used for Netflix because

the former CFO at Netflix is now on the

trade desk board which is kind of

incredible but that didn't end up

happening Microsoft got that deal but

what I I wanted to say over here with

tradedesk was the following trade desk

is really suffering a similar problem

that apple is and it has to do with that

Apple ID and people being able to opt

out of their private data being used for

advertising which makes that advertising

dollar less targeted which makes it less

valuable so companies are less

interested in spending money on that

advertising style now trade desk talks

about this fancy idea here that oh well

we only need about 10 percent of people

to be logged in and then we can model

the rest of people after that for

advertising to them I really question

that and Snapchat discusses in their uh

their earnings call not only this lower

bids per action and this falling demand

for ads and the falling overall

advertising spending but they also spend

quite a bit of time complaining about

Apple and this how challenging it has

been to really Target customers and one

of the things about this is in this app

issue has been going on for over a year

now where Apple has implemented their

new privacy rules and companies just

aren't figuring out how to transition to

a world with apple and the same thing is

happening at Facebook so here's what

you've got you've got Apple makes this

massive change on privacy and how people

can get targeted and so what happens

well you get meta saying things like oh

well we'll be able to figure out and

trade desk oh well we'll figure it out

it'll be fine and Snapchat's like oh

don't worry we'll figure it out we'll be

fine even without uh without the Apple

analytics we which we used to rely on

and make so much money on okay great so

what are these companies actually doing

and this is what gets concerning for me

for the advertising space and I think

it's a big headwind to be aware of is

meta is like uh let's go to VR yeah

that'll help save our business I'm like

that's a terrible idea we just did a

fundamental analysis with course members

on Facebook and we're like

you're going all in on the metaverse

changing your company name from from

Facebook to to meta uh to try to

capitalize on this VR kind of rush but

nobody's even figured out if people like

VR yet you put the VR goggles on you get

a headache we're we're so far from the

metaverse I mean I'll go play World of

Warcraft if I want to feel like I'm in

the metaverse almost uh it's it's quite

sad uh so at the same time what's

Snapchat doing well Snapchat's also

somewhat scrambling a good bulk of their

earnings call you know what they end up

talking about instead of talking about

VR they talk about AR and how they're

going to be able to have this awesome

augmented reality system and be able to

benefit off of it because people will be

able to put dinosaurs in their Snapchat

stories or whatever I don't know but my

point of saying this oh yeah and then of

course you have trade desks that's kind

of like oh don't worry we have a uid and

we only need 10 of people logged in we

can figure advertising out my point is

you have all of these companies that

originally are like yeah come spend your

advertising dollars with with us and

you'll get a good return on your money

because we can Target people well well

apples took that away Apple killed all

of that and now you see these

advertising companies are quite frankly

scrambling meta is trying to turn itself

into the future VR company because

they're scrambling because the ads just

ain't working Snapchat is trying to turn

themselves into an augmented reality

company because the ad numbers just

aren't showing the growth anymore and

the problem with them is they can't even

make a buck they have a billions of

dollars in convertible bonds they raise

lots of money when the stock price was

higher that was smart but this is a

money furnace and so if you're betting

on these advertising companies you have

to bet that trade desk is telling you

the truth that they can figure out what

the hell they're doing with just 10 of

the data they used to have that you're

betting on Snapchat you're betting that

augmented reality is actually going to

go somewhere where that VR is going to

go somewhere if anything this whole

advertising conundrum has a lot of

people especially even like Bank of

America analysts saying the following in

invest in Apple because maybe they're

the ones that when you're logged in with

iCloud into a million different things

and they they're tracking your Apple

wallet spend or whatever maybe they have

all the data and maybe you should just

advertise through Apple this is exactly

why some people also say Google might

have some benefits because if you're

logged in on on YouTube for example

people you know it's easier to Target

ads to you because they could see what

videos you're watching if you're

watching blippi all day long you're

probably five uh you know and if you're

watching meet Kevin all day long you're

probably 35 and if you're watching other

Finance creators maybe you're 18 because

you know we'd like to go a little bit

more detailed and some people do a

little more surface level that's fine

just Target a different audience right

uh but but YouTube can determine that

but if you're not logged in and off and

then you look at these advertising

companies and what you're getting is

companies like Snapchat going oh yeah

yeah yeah obviously longest most

exciting opportunities augmented reality

really that sounds like I'm gonna have

to make a YOLO bet on augmented reality

here if I want to invest Snapchat now I

want to be crystal clear and this by the

way is also a problem for Netflix you

know all this stuff is a problem for

Netflix too because think about it

remember Netflix is coming out with

their uh their their ad supported model

it's like okay cool like you're you guys

are also going to have these sorts of

issues as an Advertiser with Microsoft

right but anyway uh the the point of all

of this is that these companies all of

them if the stock market does this which

is kind of what it's been feeling like

because we've seen this little bit of a

rebound here these companies will rise

with the tides right but the problem is

a lot of these advertising companies

have really big anchor blocks hanging

from them and it's just going to make

future earnings misses more likely and

they're probably going to be more

frustrating companies to own compared to

companies that just aren't exposed to

this advertising conundrum right now and

certainly a declining advertising market

we've been talking about ads going down

since January and we see less sponsors

in each video right this is why have to

keep sponsoring myself use the coupon

code down below right sponsoring myself

because there are less other advertisers

we milked what we could last month I'm

sorry I know like a thousand of you were

like damn Kevin a few too many ad

Integrations okay a few too many I'm

like man I know ain't gonna last

say well we gotta pump them out let's

get them all done and then you know sure

enough it'll last uh you know because uh

because the Market's slowing down we saw

that coming we saw that writing on the

wall so uh anyway look

my bottom line is uh advertising

companies I would be very very choosy

with advertising companies right now

especially in my opinion meta I I don't

agree with VR I don't agree with ar I'm

I like trade desk but I really want to

see those advertising budgets bottom out

at companies before I could really see

myself go heavy again and again you

can't just look at the stock price and

go oh but it's up you know 10 of the

last week or whatever that that's macro

right that's Rising tide I want to be

heavy on companies that will rise with

the macro tide but will also

fundamentally perform extremely well

because again that'll insulate me with

future earnings and it'll it'll protect

me in the long term in 10 years I'm not

worried about these companies turning

into a Sears and they're going bankrupt

because they never figured out how to

make money uh anyway look don't get me

wrong I think Snapchat is great for the

people who use it their Maps feature

seems really cool you know I watched a

little bit of Ryan Reynolds show on

there and stuff like love Ryan Reynolds

like there's some cool stuff uh but they

just can't figure out how to make money

off of it so in terms of snap I don't

know problems we'll see if these are

things to pay attention to the these are

Trends but bottom line hey I was wrong

on advertising and I want to be honest

with you and I want to give you sort of

my opinion in terms of where I would be

looking to get back into advertising and

when and hopefully you got that from

this video and if you like my content

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