Snap shares climbed by nearly 20% to $34.20 during after-hours trading as the company reported record numbers across user and revenue growth for its third quarter results.
The social media platform reported daily active users (DAUs) up by 18% year-on-year to 249 million, adding 11 million users in the quarter.
This marks the app’s highest Q3 growth rate since 2017 and its fourth consecutive quarter of more than 15% year-on-year DAU growth.
The company reported a revenue increase of 52% year-on-year for the third quarter, a record high for any quarter, to reach US$679 million. Meanwhile, revenue from camera products nearly doubled year-on-year.
Analysts have credited Snapchat’s direct-response advertising platform for attracting brands, even throughout the pandemic.
"Snap's outperformance is due to its rising stature as a direct-response advertising platform and also to its unique ad offerings, such as augmented-reality advertising and ads in video Shows,” says eMarketer principal analyst Debra Aho Williamson.
“The company has also benefited from an overall increase in ecommerce-related ad spending in digital media.”
Global Revenue (in millions)
Average Daily Active Users (in millions)
The app has enjoyed a boost in users due to the pandemic, as with all social media platforms, with the number of Snaps created every day up 25% year-over-year in Q3, and the total daily time spent by Snapchatters watching Shows up by over 50% year-over-year.
However, nearly all of its growth is coming from outside of North America and Europe.
“The lackluster growth in these regions is concerning, but not completely surprising.” Williamson says.
“The initial phases of the pandemic drove increased engagement among existing social media users and caused a small number of new users to join social media properties. But as the pandemic has worn on, this ‘pandemic bump’ has abated, and growth in the number of new users for Snapchat (as well as for most other social platforms) is slowing.”
With Snap the first of the social media giants to report its third quarter earnings, analysts expect to see similar slowdowns across North America and Europe when Twitter and Facebook report next week.
Amid this boost in users from the pandemic, Snapchat launched its first global B2B marketing campaign in August to attract advertisers.
The campaign also came as big brands were boycotting social media, a move that mostly impacted Facebook in the US. Derek Andersen, Snap CFO, alluded to this boycott in his remarks.
“In addition, the auditing of social media platforms by many advertisers and agencies, which occurred throughout the summer, was ultimately constructive towards building and expanding our relationships with many of these advertising partners,” Andersen says.
“These favorable operating conditions led to rapid growth in demand from our brand advertising partners, that built on top of the already strong growth trajectory of our direct response business, and together contributed to record high active advertisers and revenues in the quarter. While we were pleasantly surprised by the favorable operating environment in Q3, we were not surprised by the growth we delivered under these conditions.”
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