Snap beats on revenue, loses users for the first time
FILE PHOTO - A woman stands in front of the logo of Snap Inc. on the floor of the New York Stock Exchange (NYSE) while waiting for Snap Inc. to post their IPO, in New York City, New York, U.S. on March 2, 2017. REUTERS/Lucas Jackson/File Photo
SAN FRANCISCO: Snap Inc shares soared more than 12 percent after hours on Tuesday as the company reported better-than-expected quarterly revenue and adjusted earnings even as daily users fell for the first time in its reporting history.Snap has been working to convince big advertisers to spend more of their budgets on Snapchat ads and reach the app's base of mainly 18-34-year-old users, and it beat analyst revenue forecasts as it drew in more international and small business advertisers.
Snap also has been redesigning the app to encourage users to interact with more of its ad-supported videos. Chief Executive Evan Spiegel said in prepared remarks that the redesign was the primary reason for usage slipping, but he credited the changes for increasing viewership of key ad-supported content this year."We believe that this is an important evolution of our product that will help drive future growth in engagement," he said. "Our users continue to spend an average of over 30 minutes on Snapchat on a daily basis."Saudi Arabia's Prince Alwaleed bin Talal separately announced on Tuesday that he finalized a deal in May to acquire a 2.3 percent stake in Snap by buying shares for an average price of US$11.Daily users fell to 188 million from 191 million in the prior quarter, which could heighten investor anxiety about how competition and privacy issues are affecting Snap and its peers.
Snap had never before logged a quarterly drop in users, according to data it has released going back to 2014. Analysts on average expected Snap to gain nearly 2 million users in the second quarter from the first quarter, according to Thomson Reuters I/B/E/S.The company said it set a record for monthly users but did not disclose the figure.Snap's user growth has pulled back sharply over the past two years. Much larger rival Facebook Inc has replicated Snapchat features such as virtual animal ear filters for selfies and the "stories" format for sharing content.A Snapchat redesign in February aimed at encouraging users to watch more videos prompted user protests after they found it more difficult to find the content they wanted. Snap in first-quarter results said it would again adjust how it presents content.
Earnings from Facebook and Twitter Inc in recent weeks spooked social media investors by showing issues around data privacy, abusive content and phony accounts were weighing on user growth and sending expenses higher. Both companies shed some 19 percent in market value after reporting, and the results also weighed on Snap shares.Snap lost about 1 million users in each of its three geographic reporting regions: North America, Europe and rest of world.Its revenue was US$262 million in the second quarter, beating the average estimate of US$250.43 million, as average revenue per user surged to US$1.40 from US$1.05 a year ago.Snapchat is popular for private messaging, but most of the ads Snap sells accompany videos that are shared with a wider audience. The redesign meant to put more of the public content front and center sparked user backlash earlier this year.Offering more ways for advertisers to purchase ads has boosted revenue this year by drawing small brands looking for cheap commercial time.But the change has made it more difficult for Snapchat to distinguish itself from other video-heavy apps and draw premium prices. The company had warned revenue growth would be lower in the second quarter as selling ads in open auction lead to weaker prices, offset somewhat by showing more ads.Snap also has been challenged by competition from Facebook's Instagram, which has more than 1 billion users and now many of the same features as Snapchat.Snap, which has never had a profitable quarter, went public in March 2017 with a US$17 share price. The stock jumped immediately following the IPO but has lost some 50 percent since.Still, the social media company's valuation signals investors see potential for outsized growth, with Snap entering trading on Tuesday at nearly 10 times expected revenue, compared to 7.6 times expected revenue for Facebook shares and 7 times for Twitter.Snap has tried to focus on developed markets with strong revenue potential, in contrast to Facebook's strategy of tailoring its apps for emerging markets that are contributing much of its new users.Snap lost US$353 million in the quarter, or 27 cents per share.(Reporting by Paresh Dave and Munsif Vengattil; Editing by Peter Henderson and Meredith Mazzilli)
Source : https://www.channelnewsasia.com/news/business/snap-beats-on-revenue--loses-users-for-the-first-time-10598192