Snap revenue surges 44% as user base expands 11M

Brief:

Snap's revenue jumped 44% to $462.5 million in Q1 from a year earlier, and the daily user base for its Snapchat photo-messaging app rose 11 million during the quarter to 229 million, per a quarterly announcement released Tuesday.
The company this year doubled the amount of upfront money advertisers committed from 2019, though it didn't provide exact figures. Direct response advertising almost doubled as a share of revenue in the past two years, now making up more than half of Snap's total revenue.
Snap significantly beat analyst estimates of $430 million, per FactSet data cited by The Wall Street Journal. The company didn't provide guidance for Q2 because of the COVID-19 pandemic and its effect on the economy, per its statement.

Insight:

Snap's revenue and user growth surged in Q1, helping to quell concerns that the coronavirus pandemic would hurt ad sales for the social media company as mobile marketers delay or cancel campaigns. Snapchat's fifth straight quarter of user growth is key for its development as a mobile marketing platform, while its usage statistics indicate strong engagement with consumers during the health crisis. Communication with friends on the company's Snapchat app jumped more than 30% in the final week of March from two months earlier and surged more than 50% in areas most afflicted with the pandemic, according to the announcement.

Snap's strong revenue gains contrast with indications from social media rivals that the pandemic is having an adverse effect on their ad sales. Facebook, the world's biggest social channel with 2.5 billion monthly users, last month hinted that its ad business had been negatively affected, while Twitter withdrew its revenue guidance amid shrinking demand for its ad inventory. Snap's revenue growth may indicate that the pandemic's effect of digital advertising is less severe than some analysts expected.

"Snap's revenue picture was much brighter than many analysts expected, considering that the global pandemic hit ad budgets hard toward the end of the quarter," Debra Aho Williamson, principal analyst at researcher eMarketer, said in a statement shared with Mobile Marketer. "If advertisers did cut budgets for Snapchat advertising, they may not have done so in large numbers before the end of the quarter." The current quarter will be more important, she added.

"Snap isn't usually seen as the first option for brands to spend their big ad budgets, as it's perceived as more of an experimental platform," Yuval Ben-Itzhak, CEO of social media marketing firm Socialbakers, said in a statement shared with Mobile Marketer. "As a result, the platform is more vulnerable to budget cuts than other social media platforms."

Snap this month had said user engagement with advertising grew in March amid record highs in usage as the COVID-19 crisis forced people to stay at home. Snapchat saw a 36% jump in install volume for app ads and a 19% gain in their swipe-up rate — key indicators of user response — in late March from a month earlier. Snapchat saw a 50% jump in time spent on video and voice calls in late March from a month earlier, while time spent playing with augmented reality features rose more than 25% for the period.