Snapchat owner Snap reported a stronger-than-expected gain in fourth-quarter revenue and gave an upbeat forecast for the current period, a sign that an overhaul of its advertising business is paying off. The shares soared on the news.
Sales rose 14% to $1.56 billion in the period ended Dec. 31, Snap said Tuesday in a statement. The social media company expects first-quarter sales of as much as $1.36 billion in the current quarter, compared with the average analyst estimate of $1.33 billion.
Snap said new advertising formats have attracted more small- and medium-sized marketers to its photo-messaging app. Chief Executive Officer Evan Spiegel spent the past several years undertaking a costly revamp of Snapchat’s ads operation, moving away from more broadly targeted brand advertising toward more targeted ads with a direct prompt or call-to-action, such as purchasing a product or downloading an app. These direct-response ads, as they are known, are more expensive to purchase and require better targeting technology from companies such as Snap.