MASTERCLASSING

Snapchat beats quarterly financial expectations but loses 3m users

Tyrone Stewart

Snap IncSnap had an interesting second quarter of 2018, exceeding Wall Street expectations on both revenue and losses but falling short on daily active user (DAU) numbers – where it suffered its first-ever decline.

The company’s Snapchat app had been expected to reach 193m DAUs in the quarter but instead saw its user base decrease by two per cent to 188m from the 191m users reported in Q1 2018. Compared to the same period last year, DAUs grew eight per cent from 173m.

During an earnings call, Snap CEO Evan Spiegel attributed the decline in DAUs to “a slightly lower frequency of use among our user base due to the disruption caused by our redesign,” adding that the company has been “working hard to iterate and improve Snapchat based on the feedback from our community” following the controversial redesign which was rolled out broadly around six months ago.

On the other hand, Snap reported revenue of $262.3m in Q2 2018 – well ahead of the $249.8m expected and up 44 per cent on the $181.7m for the same quarter last year. Meanwhile, net losses were down 20 per cent to £353.3m from the $443.1 reported in Q2 2017. This breaks down to a net loss of $0.14 per share compared to the $0.18 net loss per share expected on Wall Street and the $0.16 in Q2 2017.

Looking ahead, Snap expects revenue of between $265m and $290m for Q3 2018 – which would represent a growth of between 27 per cent and 39 per cent compared to Q3 2017. And the company predicts an adjusted EBITDA loss of between $185m and $160m compared to the $179m recorded in Q3 2017.

Elsewhere, Saudi Arabia’s Prince Alwaleed Bin Talal picked up a 2.3 per cent stake in Snapchat with an investment of $250m.

“Snapchat is one of the most innovative social media platforms in the world and we believe it has only just begun to scratch the surface of its true potential and we are blessed to be part of it,” said the prince.

What the industry is saying…

Yuval Ben-Itzhak, CEO at Socialbakers
“Snap’s Q2 earnings results have proven to be a positive surprise. Rumours in the market that Snap is looking to diversify into the lucrative gaming business have certainly been met with interest – this could be a way to gain back those all-important DAUs.

“Revenue growth shows that the company is recovering from its weaker performance in Q1 and looks to be a sign that the platform is becoming more appealing to advertisers. Snap’s partnership with Nielsen to offer deeper audience targeting capabilities may make the platform more appealing to CPG brands moving forward.

“However, the platform is still a long way behind its rivals Facebook and Instagram in terms of advertising dollars and audience size, and its other businesses like Spectacles and Snapcash haven’t achieved much success so far. Like many of the social platforms today, Snap is struggling with user growth. But the future may be looking brighter for Snap.”

Aaron Goldman, CMO at 4C Insights
“Brands are increasingly investing in Snap as a critical part of their advertising campaigns, signalling that they continue to see performance from the platform. 4C saw a 45% year-over-year increase in Snap Ads spend in Q2, mirrored by Snap’s own report of 44% revenue growth from a year ago. Snap continues to innovate to attract both users and advertisers alike, with new products like Snap Kits, Spectacles, and Shoppable AR lenses. These innovations allow advertisers to leverage the features that consumers connect with most, pointing towards a promising future for Snap.”

Sophie Light-Wilkinson, VP of marketing EMEA at Bazaarvoice
“Snapchat has ridden out the impact from the redesign of its UI earlier in the year. In May the company retracted some of the changes that separated friends’ Stories from branded content and this appears to have reversed the falling revenue growth. While this is good news in the short term, the next challenge the platform faces is raising the quality of sponsored content. According to our recent research, the repetitive nature of influencer content (47 per cent) and dipping quality (23 per cent) are now top of customer concerns.

“Already Snapchat is moving to create more informal relationships between brand and influencer. There is clearly a balance to be struck with audiences between authentic and promotional content. One solution is customer content; over three quarters of the consumers we surveyed across Europe stated it is actually fellow customer content that helps verify what the influencer is saying and remove bias – put simply, customers can be both authentic and promotional at the same time.”