Credit: Khamkeo via Unsplash
Snap’s revenue is up and more are using the social media platform but the company is concerned about the uncertain economic environment.
March quarter revenue increased 14% to $US1.363 billion and daily active users grew 9% to 460 million.
CEO Evan Spiegel said the result was driven by the progress on direct-response advertising solutions, continued momentum in driving performance for small and medium sized businesses, and the growth of Snapchat+ subscriptions.
However, the company reported “headwinds” at the start of the June quarter.
The company didn’t directly mention the global trade war, sparked by increased tariffs by the US, but big advertisers have referenced that as a cause for economic uncertainty.
“Given the uncertainty with respect to how macroeconomic conditions may evolve in the months ahead, and how this may impact advertising demand more broadly, we do not intend to share formal financial guidance for Q2,” Snap said in its letter to investors.
“While there is uncertainty regarding the macro operating environment, we remain optimistic about the long term prospects for our business.
“We remain optimistic because of the progress we have made with our ad platform to improve performance for our advertising partners, because of the progress we have made to diversify our advertiser base as well as our revenue sources with the growth of Snapchat+, because of our demonstrated ability to prioritise our cost structure to balance investment with topline growth over time, and because we have built a strong balance sheet with the financial flexibility necessary to maintain strategic focus through volatile macro conditions.”
Emarketer analyst Minda Smiley said Snap faces a bumpy road ahead as it contends with economic uncertainty, fierce competition and intrinsic challenges.
“The company’s continued focus on performance-based advertising will be a selling point for Snap as the economy remains on shaky ground,” said Smiley.
“But the reality is that most advertisers consolidate their budgets on larger, proven platforms instead of smaller, more experimental ones during periods of instability.
“And while it’s clear that Snap has had success courting small businesses, it’s far from the only social platform chasing their ad dollars, making it more difficult for the company to truly make its mark in this realm.
“There are several bright spots for Snap that should bolster its prospects in the long run: The platform has managed to turn its subscription offering, Snapchat+, into a meaningful revenue stream that’s shown steady growth each quarter.
“And like other social platforms, investments in AI-powered advertising tools are helping drive growth as well. Plus, newer ad formats like Sponsored Snaps provide the platform with new monetization routes that could pique advertisers’ interest.
“Overall, Snap is enjoying momentum, but the company said daily active users in North America fell in Q1, further proof that Snapchat is struggling to grow in one of its biggest markets.
“The company is still working on a new interface that could make the app easier to use and attract more users, but it’s not clear if that will be enough to give Snap the boost it needs to meaningfully grow its user base.”
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