Don’t Mistake Trends for Truths

Tech companies are surging; media companies are crumbling.

That’s the simple narrative that underscores just about every new development that emerges, from Silicon Valley to Hollywood. And like every cliché, there’s more than a grain of truth here. But if you blinked at the wrong moments this week, you might’ve missed some interesting data that pointed the way to a more complicated truth.

The social-media giants have been on such a torrential growth trajectory, for instance, that you may not have noticed the flashing red lights suggesting the party could be over. Snap announced second-quarter results last week that included a first-ever decline for Snapchat’s user base. It’s a downturn that could easily be attributed to the app’s controversial redesign earlier this year, but bigger rivals like Facebook and Twitter are also seeing serious softening among their audiences.

Meanwhile, over in the pay-tv universe that is traditional media’s bread and butter, the alarm bells regarding cord-cutting have been ringing for so long that you might be tempted to conclude the entire U.S. simply stopped watching linear TV. But again, the statistical reality doesn’t quite align with the prevailing perception. As analysts at Moffettnathanson noted last week, the rate of pay-tv subscriber decline during the last two quarters was an improvement over the same period the previous year.

What’s really going on here on both fronts is anybody’s guess. Truth be told, the best bet is that social media is at least starting to hit market saturation, particularly in the U.S., while pay TV is still infinitely more likely to be heading south as opposed to being on the verge of mounting a spectacular comeback.

But the nuances these data points illuminate are important, insofar as they give the lie to overly reductive pronunciations of market trends that impact the valuations of the companies in these categories. Now that social media is potentially about to get caught up in the same “sky-is-falling” mythology that has distorted the underestimated durability of multichannel video, let’s think twice before being fooled by alarmist headlines all over again.

The social-media giants have been on such a torrential growth trajectory that you may not have noticed the flashing red lights suggesting the party could be over.”