Snap Inc. Posts Best Quarter in 4 Years, With Revenue Up 116% Year Over Year

It was a robust second quarter for Snap Inc., as Snapchat’s parent company posted its highest year over year growth in revenue and daily active users in four years, with revenue reaching $982 million for the period, up 116% compared with the second quarter of 2020. Emplifi president and chief of strategy Yuval Ben-Itzhak said in an email to Adweek, “2021 is proving to be a stellar year for Snap as the platform goes from strength to strength. The focus Snap has put on its content and distribution, as well as its investment in social commerce, seems to be reaping rewards.” The company reported adjusted EBITDA (earnings before interest, taxes, debt and amortization) of $117 million in the second quarter, compared with a loss of $96 million in the same period last year. eMarketer forecasting analyst Nazmul Islam said in an email to Adweek, "Snapchat, like several digital-first companies, had a wildly successful quarter that saw revenue more than double Q2 2020. Its new products continue to help bring in more active users, with Spotlight users growing 49% and 170 million trying out its Scan feature monthly.” Snap chief business officer Jeremi Gorman said in her prepared remarks, “We benefited from a favorable operating environment and continued success with both direct-response and large brand advertisers, and we continue to leverage our performant ad products to grow our advertiser base globally. We are fully focused on making progress against our revenue and ARPU (average revenue per user) opportunities, which we believe will be driven by three key priorities. First, driving ROI (return on investment) through measurement, ranking and optimization. Second, investing in our sales and marketing functions by continuing to train, hire and build for scale. And third, building innovative ad experiences around video and augmented reality, with a focus on shopping and commerce. Our commitment to these three priorities, along with our unique reach and large, engaged community, allows us to drive performance at scale for businesses around the world.” Snapchat added 13 million daily average users in the second quarter, bringing its total to 293 million, up 23% compared with the same quarter last year. The company said DAUs increased quarter over quarter and year over year in Europe, North America and the rest of the world, as well as on both Android and iOS. Co-founder and CEO Evan Spiegel and chief financial officer Derek Andersen shared updates on Spotlight in their prepared remarks. Spiegel wrote, “While we are still in the early phases of launch and iteration, we are excited about our learnings and progress so far. Engagement is growing rapidly as we roll out Spotlight worldwide, with Spotlight DAU growing 49% quarter over quarter, and average daily content submissions more than tripling when compared to the prior quarter. We are also seeing time spent growing rapidly, with daily time spent per user on Spotlight in the U.S. growing more than 60% in the last quarter, giving us additional confidence in our ability to build Spotlight into a meaningful business over time.” Andersen added, “We continued to invest to support the launch of Spotlight in Q2, and this contributed approximately $76 million to our cost of revenue in the quarter, which is a modest sequential decline in cost as we continue to evolve the cost structure for this program to promote more content diversity by rewarding top performing content creators, while also seeding new content categories. We are pleased with our progress on this front as we’ve observed all-time highs in daily submissions after making these changes to the incentive program … While it is still very early for this new platform, we are excited about the potential for Spotlight to further expand our monetization opportunity in the future.” Apple’s rollout of iOS 14.5 and its more robust privacy permissions occurred during the second quarter, and Gorman addressed its impact in her prepared remarks. She wrote, “As Apple rolled-out its App Tracking Transparency-related changes near the end of Q2, we observed higher opt-in rates than we are seeing reported generally across the industry, which we believe is due in part to the trust our community has in our products and our business. Apple’s rollout of the most recent iOS update came later in Q2 than initially anticipated, and the pace of updates by iPhone users has also been slower than we anticipated. This has given us more time with advertisers to navigate the transition, but it also means the effects of these changes will come later than we initially expected.” Snap touted products it introduced during the period to help drive improved outcomes for its advertisers, including public profiles for businesses, its integration with Salesforce, the debut of Creator Marketplace within Ads Manager and the rollout of API lenses (application-programming interface). Spiegel added in his prepared remarks, “We are continuing to create value for businesses by reimagining the shopping experience through AR. By leveraging the long-term investments we've made in AR and personalization, we are laying the groundwork for an improved online shopping experience. For example, we are making it easier to discover new fashion items through Scan by helping Snapchatters scan a friend’s outfit, or a saved photo or screenshot, to shop similar looks and recommendations.” He continued, “When it comes to purchases and returns, we believe that helping people find the right size and improving the try-on experience could increase conversion rates for purchases, as well as reduce the rate of returns for online shopping. We are excited about this opportunity because returned goods cost businesses hundreds of billions of dollars each year and have a large environmental impact.” Islam said in his email, “Digital ad demand in general was high for the quarter, but things like Snapchat’s integration with Salesforce and introduction of API lenses certainly helped sell more inventory. We expect the high revenue growth to continue next quarter, and Snap should continue to grow users with its newer features." Ben-Itzhak agreed, saying in his email, “Social commerce has also emerged as an important pillar of growth for Snap. That platform has been active in the retail field recently with the launch of a whole host of new shopping features, from advertising to the much-talked-about AR filters, which allow users to virtually try on. But while social commerce represents a huge opportunity for the social media platform, Snap is not alone in the market. Facebook, Instagram and TikTok are also investing heavily in all things commerce. Whether Snap can innovate at the pace and to the extent that some of its bigger rivals can remains to be seen in Q3 and beyond as outstanding social commerce experiences become not just what users want, but what they demand from a platform.” Snap also highlighted its efforts on the content front, saying it aired eight new or renewed Snap Originals during the quarter and debuted 177 international channels on its Discover content platform. Spiegel said in his prepared remarks, “We have observed a number of changes in content engagement as we evolve our content products and manage through the mixed impacts of the pandemic. For example, global time spent watching content on Snap grew year over year, while lapping the boost in engagement we saw at the onset of the Covid-19 pandemic, but we have also observed a year over year decrease in daily time spent watching user-generated Stories created by friends, even as the number of daily viewers of that content has grown year over year. We believe this is due in part to a decline in the volume of daily Story posting activity on Snapchat, coinciding with mobility restrictions and behaviors related to the Covid-19 pandemic, which reduces the amount of content created by friends that is available to watch.” He continued, “While it is unclear when these restrictions will end and how user behavior will evolve, we are seeing stabilization and early recovery in Story posting as some communities are reopening and reducing restrictions, and we are cautiously optimistic that this will lead to increased time spent watching Stories from friends as the world begins to open up.” Snap discussed other updates introduced during the period in its camera, AR platforms and partner and developer ecosystem, including: Improved try-on capabilities in Lens Studio 4.0, such as advanced cloth simulation, multi-person 3D body mesh and a new visual effects editor.TrueSize technology to improve eyewear sizing and wrist tracking technology for accurate watch try-ons.New categories for its Scan feature, including fashion and food.Camera Shortcuts, which help Snapchatters find the most relevant camera mode, curated soundtrack or lens without leaving their camera screen.Connected lenses, which allow Snapchatters in different locations to interact with each other via AR.Camera Kit partnerships with Bumble, Disney and Viber.Snap Kit integrations with YouTube and YouTube Music.A Bitmoji for Games partnership with Unity.Sticker Kit, with more than 34 million Bitmojis, GIFs and stickers that can be integrated into partners; applications.A Layers feature for Snap Map that lets Snapchatters find personalized experiences from select partners right from the Map. Spiegel said in a statement, “Our second quarter results reflect the broad-based strength of our business, as we grew both revenue and daily active users at the highest rates we have achieved in the past four years. We are pleased by the progress our team is making with the development of our AR platform, and we are energized by the many opportunities to grow our community and business around the world.”