Snapchat’s results 'set the bar' for other social media companies

Mariam Cheik-Hussein
By Mariam Cheik-Hussein | 22 July 2020

Snapchat has avoided the worst of the pandemic’s economic hit, reporting growth in revenue and users in the last quarter which analysts say set the bar for Facebook and Twitter.

The social media company added an extra nine million users in Q2 to reach a total 238 million average daily active users, up 17% year-on-year.

Snapchatters, facing weeks-long lockdowns around the globe to curb the spread of coronavirus, opened the app more than 30 times a day on average during the second quarter.

Revenue also grew, although at a slower rate, by 17% year-on-year to reach US$454 million, compared to US$388 million in the same period last year.

Snapchat was able to beat analysts expectations at a time when many advertisers have pulled back on spend due to the financial impact of the pandemic.

eMarketer principal analyst Debra Aho Williamson puts the app’s performance for the last quarter down to its investment in its advertising products.

“Snap had a good quarter, considering the pandemic,” Williamson says.

“The increase in user count in all of its regions is a positive sign, and it managed to beat financial analysts' expectations for revenue, which is notable given that many advertisers pulled back ad spending during the quarter as they scrambled to deal with the effects of the economic shutdown in April and May.

"We believe that Snap's recent strength in performance advertising is a key factor behind its results in Q2.

“As the first social media company to report Q2 earnings, Snap's user growth and revenue gains are setting the bar for Twitter on Thursday and Facebook next week."

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Snapchat recently unveiled a list of new features, including Brand Profiles which gives brands a permanent presence on the app, First commercial, which guarantees advertisers the first ad a user sees in their Snapchat show session and it’s also enabled app and web attribution for ads to help advertisers understand the impact a video on Snapchat has on their business.

Chief financial officer Derek Andersen acknowledged the “challenging” environment of the pandemic which has impacted advertisers, but estimated third-quarter revenue growth to be 32% through July 19.

“While we are cautiously optimistic that these trends could sustain over time, we are also conscious that operating conditions may remain volatile, and that economic conditions could further deteriorate,” Andersen says.

“For example, advertising demand in Q3 has historically been bolstered by factors that appear unlikely to materialize in the same way they have in prior years, including the back to school season, film release schedules, and the operations of various sports leagues.

“At this point in time it is difficult to predict how these factors may impact advertising demand in the remainder of Q3. Our best estimate at this point is that our full quarter revenue growth rate is likely to be below our quarter to date estimated actual growth rate, and as a result we have built our internal investment plan based on revenue growth of approximately 20 percent.”

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