Snap Reverses Slide as User Growth and Revenue Jump
Posted February 6, 2018 8:37 p.m. EST
SAN FRANCISCO — Snap finally snapped its losing streak.
As the messaging and media company prepares to celebrate its first anniversary as a publicly traded stock, it handily reversed a slide that consumed much of the past year. After it released fourth quarter results Tuesday, Snap’s beleaguered shares rose more than 20 percent in after-hours trading.
“Our business really came together towards the end of last year,” Evan Spiegel, Snap’s chief executive, said in a conference call with analysts.
Revenue was $286 million, up 72 percent from a year earlier and about $30 million more than analysts had expected. Daily users rose 9 million to 187 million, the best growth in over a year. The retention rate of new Android users, a special focus for Snap, jumped nearly 20 percent over the previous year.
The company lost $350 million in the quarter, or 13 cents a share, which was narrower than the loss of 16 cents that was expected by analysts. And it also contrasted with the carnage of the prior quarter, when Snap recorded a net loss that was twice the forecast.
Analysts were excited enough to mix their metaphors.
“Overall, this quarter was a major step in the right direction for the company and will be a tough pill to swallow for all the naysayers that threw in the white towel over the last few months,” wrote Daniel Ives of GBH Insights in a note to investors.
What went right? Snap, which makes nearly all of its money from advertising, made it much easier to buy ads through an automated system. That also expanded the list of potential ad buyers to medium-sized firms.
“For the first time, revenue in Q4 from advertisers outside of Ad Age’s Top 100 exceeded revenue from the Top 100 Advertisers,” Imran Khan, Snap’s chief strategy officer, said during the conference call.
However fast Snap is growing, it still has the world to conquer. EMarketer, a research firm, estimated that the company will generate $1.47 billion in net worldwide ad revenue this year, up 90 percent over 2017. That will give Snap less than 1 percent of the worldwide digital ad market.
Snap, based in Venice, California, may be benefiting from troubles at its much larger rival, Facebook. Under pressure from multiple sides, Facebook said last week it had made changes that reduced the hours its 2 billion users were spending on its pages.
Snap shares closed Tuesday during regular trading at $14.06. Even with the after-hours spike from the earnings, shares are about $17, which was the initial offering price last March. In its early days, the Snap platform was dismissed as a fad for teens. That criticism has been tempered, but there are still many doubters.
“The good news is that people continue to use Snapchat as voraciously as they have in the past,” said Rich Greenfield, media and tech analyst at the research firm BTIG. “The question remains, how big a business is it?”
Greenfield said Snap was a communications company that was trying to develop an advertising business. “They’re trying to do something that hasn’t been done,” he said.