What happened

Shareholders of Facebook owner Meta Platforms (META 0.49%) lost ground to the market in early trading on Friday. The stock fell 8% by 12:15 p.m. ET today, compared to a 0.7% decline in the S&P 500. The drop added to significant losses in recent months, with Meta Platforms shares down about 50% since the start of 2022.

It was sparked by a tough earnings report from a rival in the social media space.

So what

Snap (SNAP 1.60%), the owner of the Snapchat platform, said on Thursday afternoon that industry conditions have deteriorated further in recent weeks. Sales growth slowed to just 13% from 38% in the prior quarter, as its service struggled with declining advertising spending. Average revenue per user fell 4% after growing by nearly 20% in each of the last two quarters.

Management added context to its earlier warning of deteriorating market conditions, especially in the advertising space. These pressures caused earnings to decline and cash flow to turn negative. "We are not satisfied with the results we are delivering," Snap executives said in a letter to shareholders .

Meta Platforms' stock fell in sympathy with Snap's, which was down nearly 40% on Friday.

Now what

Meta Platforms is in a strong financial position to navigate any slump in the social marketing space. It generates plenty of cash flow from its wide portfolio of products in niches such as social media and virtual-reality gaming.

Still, it makes sense that investors are growing concerned about a period of tough results ahead. CEO Mark Zuckerberg has hinted that such a pullback is on the way, and Snap's latest results add fuel to that pessimistic reading on the industry.

The good news is that Meta Platforms will announce its second-quarter earnings results in just a few days, on July 27. That means investors won't have to wait long for more clarity about its operating trends.