Snapchat Reaches 332M Daily Active Users at End of Q1 2022

Snap Inc. outlined its financial results for the first quarter of 2022 last week, reporting revenue of $1.06 billion, up 38% from the same quarter last year. Chief financial officer Derek Andersen explained in his prepared remarks, “The slowdown in the rate of year-over-year growth observed post the invasion of Ukraine was broad-based, with the deceleration evident in both our direct response and brand advertising businesses and in many industry verticals. In the latter portion of the first quarter, advertisers in a wider variety of industry groups reported concerns related to the macro operating environment, including continued supply chain disruptions, rising input costs, economic concerns due to rising interest rates and concerns related to geopolitical risks stemming from the war in Ukraine. While the impact of these headwinds was felt broadly, our Brand advertising business grew at a relatively slower rate of 26% year-over-year in the first quarter, as new headwinds built on top of supply chain and labor supply headwinds already impacting a subset of industry sectors coming into this quarter.” Chief business officer Jeremi Gorman added, “In addition to these ongoing platform-related headwinds, supply chain shortages and labor disruptions, rising inflation and geopolitical unrest are presenting challenges for a wider array of industry verticals than in the prior quarter. Nonetheless, we saw strong growth in verticals like financial services and streaming, which each grew well over 50% year-over-year. We believe that the impact from the ongoing platform policy changes was compounded by macroeconomic challenges, which are now the primary headwinds to client demand.” Snapchat reached 332 million daily active users as of the end of March, up 13 million from the fourth quarter of 2021, reporting quarter-over-quarter and year-over-year increases across Europe, North America and the rest of the world. The company said revenue from dynamic ads more than tripled year-over-year, with increased use of product catalogs, and Gorman noted that more than 70% of the company’s revenue from AR originates through its self-serve ads platform. She added, “While the majority of our revenue today is generated from video ads, we believe we are still early in terms of realizing the full monetization potential of our content platform. Today, we comprise less than 2% of the $210 billion U.S. digital ad market and less than 1% of the $520 billion global digital ad market, while reaching nearly one-half of U.S. smartphone users and more than 75% of 13- through 34-year-olds in over 20 countries. In addition, mobile advertising is growing faster than desktop advertising, video advertising is growing faster than non-video advertising and self-serve advertising is expected to make up 90% of all digital display ad spend in 2022. These trends are favorable for our strategy, and we believe our video advertising business has the potential to deliver robust top line growth.” Forrester principal analyst Kelsey Chickering agreed, saying in an email, “It's interesting to see how Snapchat positions its inventory not so much as ads, but as a canvas and tool for creators, publishers and advertisers to get creative on (and off) the platform. It’s realizing this vision that ‘AR belongs everywhere’ through things like Dynamic Stories for publishers, Spotlight for creators and lens creation for advertisers.” Snap said more than 250 million Snapchatters engaged with AR on its platform daily, up from 200 million reported in the fourth quarter of 2020. Chickering pointed to the platform’s social commerce potential, saying, “In Forrester's Consumer Technographics Retail Topic Insights Survey 2021, 61% of U.S. online adults under 25 say they've completed a purchase on a social network without leaving the website or application, which is up from 53% in 2020. Leaning into AR use cases related to shopping, such as virtual try-on, uniquely positions Snapchat compared to other social platforms in the commerce space.” The company said total time spent by users 25 and older engaging with Shows and publisher content was up by more than 25% year-over-year, while total time spent on its Spotlight user-generated content platform skyrocketed 230% over the same timeframe, and the number of Spotlight submissions using Snap’s creative tools or lenses surged 350% versus the year-ago period. Co-founder and CEO Evan Spiegel said in his prepared remarks, “We are very excited about the long-term potential of Spotlight. While still early in its growth and evolution, we’re pleased with the engagement we’re seeing, with total time spent growing 230% year-over-year. Snap said six partners in its Discover curated content platform topped 100 million global viewers during the first quarter. The company added that its users opened places from its Snap Map more than twice as much during the three-month period as in the first quarter of 2021. Andersen shared the company’s outlook for the next quarter, saying, “As we look forward to the second quarter, we are pleased with the momentum we have observed in our community, and our guidance for the quarter assumes that DAU will be approximately 343 million to 345 million. On the revenue side, forward looking visibility is as difficult today, or perhaps more difficult, than at any point in recent memory. While the 116% revenue growth we experienced in the second quarter of the prior year makes the comparisons more difficult this quarter, we believe the bigger challenge to forward looking visibility is the uncertain operating environment. The macro headwinds we observed in the first quarter—including supply chain disruptions, labor shortages, inflationary pressures and the impact of rising interest rates on the overall economic environment—remain challenges as we enter the second quarter. We believe the impact of the war in Ukraine on input costs, marketing budgets and overall economic confidence has been significant, and that it is difficult to predict its impact on a forward-looking basis.” He added, “Given the uncertainty caused by these challenging circumstances, we have opted to share that our growth rate thus far in the second quarter is approximately 30% year-over-year, or just below the approximately 32% growth rate we observed following the invasion of Ukraine in the first quarter. That said, we are concerned that the operating environment ahead could be even more challenging, leading to further campaign pauses or advertiser budget reductions, and, as I noted earlier, our prior-year comparisons are more difficult in the second quarter than in the first quarter. Given this, we believe that revenue guidance of 20% to 25% year-over-year revenue growth in the second quarter is reasonable.” Spiegel said in a statement, “We remain focused on providing value for our growing community, delivering return on investment for our advertising partners and investing against our enormous opportunity in AR. We’re excited to share many new products and services at our annual Snap Partner Summit.”

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Snapchat Reaches 332M Daily Active Users at End of Q1 2022

Snap Inc. posted revenue of $1.06 billion, up 38% year-over-year

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