Snapchat’s Daily Users Increase in Q4, But So Does Snap Inc.’s Net Loss

A $187.5 million settlement of a class-action suit was a major factor

Snap reported $561 million in revenue for the quarter, up 44% year-over-year
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Snapchat continued to add daily active users during the fourth quarter of 2019, but parent company Snap Inc. was still in the red for the quarter, posting a net loss of $241 million.

Snap reported $561 million in revenue for the quarter, up 44% year-over-year. However, the company’s net loss was $49 million higher than in the fourth quarter of 2018, due largely to a $187.5 million settlement of a class-action suit by investors following its initial public offering in March 2017.

Chief financial officer Derek Andersen said in his prepared remarks, “We shared last quarter that we intended to invest in the future of our business by growing our talent base, and we have begun to do so. Full-time headcount grew 11 percent year-over-year in the fourth quarter, with the growth in headcount focused on monetization and engineering, and this was the primary driver of our year-over-year operating expense growth. While there is typically a lag between investing in talent and improved output metrics, we are pleased with the momentum we are seeing from the investments we have made over the past year and expect to continue to invest productively in the growth of our business going forward.”

Snapchat closed the quarter with 218 million DAUs, up 17% compared with the fourth quarter of 2018, and the company said DAUs have increased sequentially and year-over-year in North America, Europe and the rest of the world, as well as on both iOS and Android.

Snap Inc.

Yuval Ben-Itzhak, CEO of social marketing platform Socialbakers, said in an email, “Despite its growing user base, Snap’s fourth-quarter results met with disappointment. Its investment in innovation is coming with a cost, and with the likes of Instagram and TikTok focusing on the same demographic, Snap faces the stiffest competition so far in the fight for ad spend. Over the past year, Snap has invested in flashy ad formats like 3D paint on selfies and Bitmojis, but only time will tell if funky content formats will be enough to keep marketers from moving their ad budgets to Instagram or TikTok.”

Snap pointed to moves it made to bolster its advertising platform, saying that revenue from its non-skippable commercials more than tripled year-over-year, while revenue from Story ads more than doubled.

CEO Evan Spiegel said in his prepared remarks, “We have started investing heavily in our ranking and optimization efforts this year to increase the scale and return on ad spend that we are able to deliver to performance advertisers. As these early investments are starting to bear fruit, we are getting better at increasing the value and relevance of each ad impression. Not only does this increase the return that our advertisers receive from their investment in our platform, but it can simultaneously reduce the number of impressions we show for a particular campaign. This frees up inventory for additional campaigns, while improving the user experience by reducing the number of ads shown that are not relevant to a particular individual. As with any new technology platform, we expect ongoing improvements to be steady but incremental, and we plan to significantly increase our investment in product and engineering talent to build upon the gains we have made in this area.”

Chief business officer Jeremi Gorman said in her remarks, “We are fully focused on making progress against our ARPU (average revenue per user) opportunity, which we believe in the short- to medium-term will be largely driven by advertiser demand. We have significant headroom in our business, given our high levels of engagement and ample supply of available impressions globally. As a result, we are focused on driving demand from advertisers to improve CPMs (cost per thousand impressions) in our self-serve auction.”

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