Redburn has updated its recommendations for a group of smaller social media companies, elevating Snap to a Buy rating, moving Pinterest down to Neutral and reaffirming a Sell on Reddit. The adjustments reflect the firm's view that artificial intelligence is reshaping the online advertising landscape in a way that favors larger incumbents.
Analysts Joseph Barker and James Cordwell set out their thinking around what they describe as a structural split in digital advertising. As they put it, "AI is driving a bifurcation of the online advertising market," with Meta widening its lead while smaller platforms encounter catch-up efforts that are becoming "increasingly fruitless." Against that backdrop, Redburn said smaller social networks face limited choices beyond pivoting their business models.
Redburn argues the most credible path for these second-tier platforms is a multi-pronged shift: pursue alternative revenue streams, improve the sophistication and effectiveness of advertising, and exercise strict cost discipline. The firm frames this strategic pivot as essential for firms that can no longer compete on growth-at-all-costs.
Snap received the most constructive appraisal. Redburn raised its price target on Snap to $10 from $5. The firm highlighted a subscription business that it says is already running at an annualized rate above $1 billion, and it expects the company’s core advertising business to move from an estimated operating loss of $553 million in fiscal 2025 to an operating profit of $29 million in fiscal 2027. Redburn views Snap as relatively well placed among the peer set to diversify revenue, citing the company’s strong user loyalty and identity-driven assets.
Pinterest was downgraded to Neutral even as Redburn lifted its price target to $23 from $17. The report criticized Pinterest for continuing to pursue what Redburn called the same growth approach that has not worked for it to date, quoting the phrase that the company is "doubling down on the same approach to growing the business that has failed it to date." The analysts also flagged Pinterest as having the least potential for revenue diversification among the trio.
On Reddit, Redburn trimmed its price target to $110 from $125 and maintained a Sell rating. The firm warned that a slowdown in advertising revenue combined with the risk linked to data licensing renewals makes Reddit’s premium valuation particularly exposed.
The report centers on a view that AI-driven changes to ad targeting and effectiveness are creating winners and losers in the ad market, and that smaller platforms will need to execute material strategic changes to defend or improve their financial positions.