Snap’s stock price fell by more than 11 per cent – before levelling out at a loss of about six per cent – in after-hours trading, after the company reported that it had fallen short of user growth estimates and increased its year-on-year (YoY) net losses in the second quarter of the year.
Snapchat’s daily active users (DAUs) reached 238m in Q2 2020, a YoY increase of 35m or 17 per cent. Despite the growth, the DAU figure missed out on the company own estimates of 239m as well as analyst estimates, which ranged from 238.44m to 239.1m.
Snap attributes the DAU miss to an early coronavirus lockdown-related boost fading faster than it had expected.
The company’s revenue also increased 17 per cent to $454m, growing from $388m the year prior. This revenue growth was a big positive for Snap, with it coming in well-above estimates of between $440.8m and $441.6m.
Despite that, the company’s losses increased massively when compared to Q2 2019. Losses were reported as $326m for the second quarter of 2020, leaping 28 per cent from the $255m the year prior.
Aaron Goldman, Chief Marketing Officer at 4C Insights (recently acquired by Mediaocean), said: “Despite a widening net loss in Q2, Snap’s daily active user count and revenue were both up 17 per cent year-on-year which is pretty remarkable given the pandemic and economic crisis. This growth goes to show just how much the platform is picking up steam with consumers and advertisers alike. Looking ahead, with new innovations like Snap Minis and Brand Profiles, we expect further adoption and engagement. These features will provide more commercial intent and targeting signals in the Snap ecosystem heading into the golden quarter. Clearly the imperative for marketers is to implement an agile and omnichannel advertising playbook anchored by modern system of record software.”
Yuval Ben-Itzhak, Socialbakers CEO, said: “Unlike its rivals Facebook, Instagram and TikTok, Snap has sailed through the first half of the year. Strong Q1 earnings and a solid Q2 cemented the platform's position as a social media platform to be reckoned with. The platform has not only been able to capitalise on the lockdown to grow user traffic and engagement, but it also recently announced updates such as augmented reality, Local Lenses and Bitmoji for games which will likely attract both users and advertisers to the platform.
“Snap's competitors are facing immense challenges: its biggest rival for younger audiences, TikTok, is facing tough headwinds in the US, with talks about the platform being banned due to espionage concerns. Meanwhile, Facebook and its family of apps are still weathering the storm of an advertising boycott. This could be a chance for the platform to capitalise on its recent innovations and grow its audience size and its appeal to advertisers.
“However, Instagram's imminent launch of Reels in the US market, a rival to TikTok capitalising on the content format of the moment, is likely to pose a threat to Snap's ambitions. With more than 1 billion monthly active users on Instagram, Snap can't come close to offering the scale of Facebook's family of apps. It's differentiation and innovation that will keep Snap thriving in Q3 and beyond.”