Snapchat’s most recent earnings call took place on August 7, 2018 and provided insight into the company’s current standing as well as their plans for the future of Snap Inc.. In the earnings call, executives discuss the financial report of the previous reporting period, in this case, the second quarter of 2018.
Snap saw a two percent decline in daily active users (DAU) this quarter; CEO Evan Spiegel attributed this decline primarily to the disruption caused by the initial redesign of the app. Despite Snapchat’s slight drop in DAU, the company’s revenue increased 44 percent year-over-year. Last year in the second quarter, Snapchat brought in $182 million in revenue, whereas this year, revenue was $262 million. Snapchat users are continuing to use the app for 30 minutes on average daily, with over 3 billion Snaps sent per day.
It has now been six months since Snapchat rolled out the re-design. Based on the outpouring feedback from the community, Snap rolled back a few of the design changes, including reverting Snaps and chats to chronological order and moving Stories from the “friends” section to the right side of the app’s user interface. Friend stories have been separated from the other content that is offered on the app, as part of the redesign update, and have been placed at the top of the Discover page.
More recently, Snap started running ads in their Shows that are un-skippable, meaning the user has to watch the full ad before continuing the show. Snapchat Shows are a short-form video containing a series of clips that were only available for premium content providers such as NBC Universal. Snap has now extended Shows to creators on the platform and is looking to do more work with influencers.
Augmented Reality Advancements
Augmented reality continues to be a fantastic long-term opportunity for Snapchat. Recently, Lens Explorer has been released, which allows users to browse the thousands of Lenses built by the Snap community using Lens Studio.
Snappables were also released in the spring, which are a fun and interactive augmented reality gaming experience that is shared between friends. These AR games use your touch, motion and facial expressions to compete for high scores or take part in head-to-head matchups. Snappables are accessible alongside Snapchat’s other lenses. To play, you select a game Lens and simply follow the on-screen instructions. You can send a Snap of you playing the game to a friend allowing them to join in. Evan Spiegel explained that “Selfie Mix,” one of the first Snappables, has generated over 300 million Snaps since it was rolled out globally in April.
Just last week, Snap launched augmented reality Lenses that respond to a user’s voice. The Lens will ask the user to say words such as “wow,” or “okay,” which will cause the Lens to animate. For example, when I say “okay,” a little cat paw pops up that’s making the okay symbol.
During the earnings call, CFO Tim Stone mentioned that Snap is interested in monetizing every part of the app, including the communication component. Currently, ads are mainly served through Snap Ads that can be found on the Discover page (right side of the app), with the exception of sponsored Augmented Reality lenses that are interspersed with non-sponsored lenses supplied by Snapchat. Josh Constine from TechCrunch, believes this could lead to more ads in the messaging inbox (left side of the app), which is beyond the current sponsored augmented reality lenses that are currently available.
Snap’s advertising revenue saw a 48 percent year-over-year increase to $262 million and ad impressions were also up 191 percent year-over-year. Impressions refer to the total number of times the ad was served to users. This impression growth is a result of how Snap serves their advertisements. Their ability to directly target specific leads to more targeted advertising, which in turn, has increased the advertisers’ return on investment (ROI). Snap’s targeting capabilities were updated and streamlined this quarter, with more specific targeting based on user’s interests. According to Imran Khan, Chief Strategy Officer, Snap now has the ability to get as specific as targeting campaigns towards users who had purchased lipstick at a retail store.
Snap focuses on serving the most relevant ads to users and they are aware that if even one ad is served to the wrong user, it greatly takes away from the user’s experience. The ranking of advertisements as well as the multitude of advertisers on the platform is crucial. If users are consistently seeing relevant ads, it results in a better ROI and also ensures that user experience remains positive.
Tim Stone states that Snap is investing in new innovative initiatives to enhance engagement and drive revenue growth. They are also working on operating cost efficiency initiatives in order to move towards free cash flow generation and overall operating profitability over time.
Geofilter Studio will be sure to keep our customers up-to-date with any other Snapchat developments that add features to the app or impact the app’s functionality. As always, if you’re looking to advertise on the platform, please feel free to reach out to an Account Manager at [email protected]ofilter.studio.