Social Media Summer Ad Spend Shifted To Snap

Snap posted massive revenue gains and increased its user base to 249 million amid a tough Q3 for Facebook and TikTok

Snap reported big Q3 gains Tuesday.Snapchat, iStock

For the third quarter of 2020, Snap posted impressive gains in its user base and revenue, beating internal expectations after six months of quarantine in the United States.

The social media company saw 249 million daily active users, up 18% from 210 million the same time last year. Snap also generated $679 million in revenue, a 52% increase over Q3 2019.

Snap attracted 11 million new daily users since last quarter and $225 million in additional revenue. 

In prepared remarks, CEO Evan Spiegel attributed Snap’s revenue gains to “the substantial value we drive to both direct response and brand advertisers during this continued period of uncertainty.” He also touted the business’ commitment to augmented reality, which, he said, has begun to pay off.

“The adoption of augmented reality is happening faster than we had previously anticipated, and we are working together as a team to execute on the many opportunities in front of us,” Spiegel said.

Snap may have been the beneficiary of advertising dollars allocated away from Facebook, which experienced a massive ad boycott in July in protest of the company’s policies and enforcement on hate speech. Emerging social video giant TikTok also faced enormous regulatory pressure in the United States, as the Trump administration attempted to ban it.

“As brands and other organizations used this period of uncertainty as an opportunity to evaluate their advertising spend, we saw many brands look to align their marketing efforts with platforms who share their corporate values,” Chief Business Officer Jeremi Gorman said in prepared remarks. “This gave us an opportunity to engage with advertisers and agencies in real time to ensure that our existing partners as well as new prospects understood our offering in relation to our values.”

Gorman said that Snap’s sales team had “many productive C-level conversations” about brand safety and return on investment during the quarter. She previously said that the Facebook boycott “opened the door” to these conversations between Snap and advertisers.

Meanwhile, in India, there’s reason to believe that the government’s recent TikTok ban, which was successful unlike that of the US, has also helped Snap. In the subcontinent, viewership of Snapchat Discover content is up nearly 50% since last quarter, Spiegel said.

When asked about whether they attribute these trends to Facebook’s and TikTok’s struggles, a Snap spokesperson declined to comment, referring Adweek to executives’ public statements.

Debra Aho Williamson, principal analyst at eMarketer, said that Snap’s successes are due to its direct-response advertising business and augmented reality ads, as well as ads in its original programming. 

However, she added that it’s concerning “but not completely surprising” that most of Snap’s user growth is happening outside North America and Europe.

“The ad boycott definitely opened up opportunities for Snapchat (as well as TikTok) to have conversations with advertisers who had pulled back spending on Facebook,” Williamson told Adweek. “I believe Snapchat was able to win some business as a result, but I think its growing strength in performance advertising has helped as well.”

Williamson said she expects to see similar slowdowns in Facebook and Twitter’s earnings reports next week.

“Advertisers such as ecommerce companies, mobile app developers and technology companies all rely heavily on performance advertising, and as they look to reach audiences across the social landscape, properties like Snapchat are becoming more important,” she continued.

Derek Andersen, Snap’s CFO, said that while Q4 spending remains uncertain, he expects 47-50% revenue growth year-over-year in the year’s final quarter. The company is also anticipating 257 million daily active users, which would mean adding 8 million new users in the quarter.

Snap stock soared more 20% in after hours trading following the announcement.

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