Snap Inc., the parent company of Snapchat, has released its latest earnings report, showing an increase in users and improved revenue outlook, as engagement with the app rises amid COVID-19.
First off, on users – Snapchat added 11 million more daily actives in Q3, taking it to 249 million overall.
The growth continues Snap’s momentum, which had stalled at one stage early last year. At that point, many attributed Snap’s struggles to the rise of Instagram, and specifically, Instagram Stories, which Facebook had replicated from Snap. But the app has re-grouped, and with the COVID-19 lockdowns forcing people to seek alternative entertainment options, Snapchat has gained 20 million more daily actives this year.
For context, Twitter currently serves 186 million monetizable daily active users, a slightly different metric, but relevant for reference.
The majority of Snap’s user growth is in the ‘Rest of world’ category, which has seen the most benefit from Snap’s decision to upgrade its Android app in April last year. Specifically, Snapchat’s seen significant growth in India, which is dominated by Android devices. For a long time, Snap had largely ignored its Android app, but the need to cater to a broader spectrum of users prompted a re-think back in 2018, which has now resulted in key growth opportunities for the platform.
Snapchat also notes that Indian users are increasingly consuming its original Discover content:
“The daily average number of Snapchatters in India watching Discover content increased by nearly 50% sequentially in Q3 2020.”
Total daily time Snapchatters spent watching Shows has also increased by over 50% year-over-year, which reflects Snapchat’s positioning as a new media leader, with its shorter, Gen Z focused programming establishing new viewer habits, and further solidifying Snap’s position as a key platform for connecting with younger audiences.
And that audience reach comes in different genres – for example, Snapchat says that more than 40% of the US Gen Z population watched sports Discover content on Snapchat last month.
While there was a time where it seemed like Snap might get engulfed by the Facebook juggernaut, the platform has continued to double-down on its foundations, and its connection to its audience, and their interests, is key to keeping the app a step ahead in the eyes of younger users.
That’s also reflected in its usage stats – Snap says that the average number of daily Snaps created has grown 25% year-over-year, while it had another AR hit recently with its ‘Anime’ Lens, which transforms users into Anime-style characters.
The visual effect was “engaged with 3 billion times in its first week”, and has once again prompted more people to download and open the app, another big win for Snap’s evolving AR tools. And interestingly, as reported by Fast Company, the Lens has actually been a bigger hit on TikTok, with users adding the feature on Snap, then re-posting in their TikTok clips.
AR is where Snap continues to hold a lead, and it recently added a new ‘City Painter’ option in London, which enables users to leave their own digital contributions to Carnaby Street. Snapchat will also be among the first to incorporate Apple’s new LiDAR spatial technology for Lenses, while Snap also says that over 1.5 million Lenses have been created by its community through Lens Studio.
Really, given the resources at its disposal, Facebook should be the AR leader – but again, Snap’s connection to its audience, and nous for creating new, interesting features has helped keep it ahead.
The next phase, of course, will be AR-enabled glasses, which both Facebook and Apple are progressing towards. Snap would love to have its own version, with an updated Spectacles model potentially able to make that leap. Whether Snapchat’s in a position to do so, capacity-wise, is another question, but you can expect that they’ll be looking to compete, whenever that next level arrives.
In terms of revenue, Snap Inc. posted a 52% YoY increase to $679 million in Q3.
That’s a significant jump, with the app’s North American earnings surging in the quarter. Snap shares were up 20% in after-hours trading on the back of the announcement.
Snap CEO Evan Spigel has attributed the revenue growth to a renewed focus on its ad products and offerings.
“Two years ago we transformed our business by relentlessly focusing our attention on delivering return on investment for advertisers and building new products and experiences to serve our community. The revenue and community growth we have generated as a result of these efforts has afforded us the opportunity to double down and innovate even more, especially around our camera and augmented reality platform.”
That’s resulted in new AR offerings, like Snap’s shoppable ‘try-on’ campaigns for shoes.
Again, Snap’s innovation, combined with its creative capacity, is helping to secure its place, and advertisers are now coming around to the array of promotional options, and reach potential, available in the app.
And what market analysts would be particularly enthusiastic about here is potential. Take a look at Snap’s Average Revenue Per User charts.
Snap’s ARPU is soaring in the US, rising in Europe, and still has major potential to follow through in other regions.
Of course, some of these numbers are skewed by the COVID-19 lockdowns, and it’s impossible to know whether Snap will be able to hold its usage trends in the wake of the pandemic. But right now, the signs are good – Snap’s users are engaged, they’re consuming more content, they’re using its AR features.
It’s not surprising to see the market backing the company, based on these results.
