On Monday, Snap (NYSE:SNAP) warned investors that worsening global conditions are impacting its business, and investors should lower expectations.

This warning sent Snap’s stock down 43%, with the NASDAQ falling 2.3% yesterday.

What’s the big deal? Advertising was expected to slow — but now we’re seeing just how bad it can get.

• In an 8-K filing, Snap said, “The macroeconomic environment has deteriorated further and faster than anticipated.”
• As a result, Snap expects to miss its 20-25% sales growth and EBITDA profitability targets.

Snap raised debt earlier this year — fortifying its cash and short-term investments balance to $5B — enough to fund its losses for years.

Users are still growing, but if advertising demand worsens further, investors will still expect profitability, even if that means forcing hard decisions on Snap’s founder, Evan Spiegel.

“Default alive”: To survive, Snap is slowing hiring and new investments — but without any layoffs… so far. We’re already seeing similar trends play out in the market:

• Preparing for a recession: Companies are slowing hiring, laying off employees and cutting their sales/earnings forecasts.
• Lowering investor expectations: 70% of companies that gave earnings guidance for the next quarter issued negative guidance (e.g., reducing earnings/sales forecasts).

The effects go beyond the public markets. Privately traded buy now, pay later giant Klarna is laying off 10% of its employees (~700 employees) — and famous startup accelerator Y Combinator told its founders to “plan for the worst” and get to “Default Alive.”

Social problems: Snap’s troubles also sent other social media stocks crashing (i.e.,PINS

down 23%,FB

down 8%).

For Twitter, with each passing day, the chances of an acquisition at its original $54.20 price seems more and more unlikely.