Snapchat offers first glimpse of social media advertising prospects in the pandemic
Snapchat reported its advertising revenue hit $462 million in the first quarter—a 44 percent year-over-year increase that impressed Wall Street—and the company gave a sense of how advertising is still growing, even if at a slower rate, through the coronavirus pandemic.
“We’re really pleased that the business has continued to grow under these conditions,” said Derek Andersen, Snapchat’s chief financial officer, in an earnings call with Wall Street analysts on Tuesday.
Snapchat became the first of its class of internet advertising companies to deliver a quarterly financial report, giving an early glimpse into how the global crisis has affected the industry. The quarter ended March 31, about two weeks into the period during which the most drastic steps were taken to combat the spread of COVID-19, like the nationwide shutdown.
Snapchat has not appeared to be as hard hit as some other companies on Wall Street. Shares in the stock rose close to 20 percent in after-hours trading when the quarterly revenue beat analyst expectations.Snapchat executives said the company has been able to weather the global shutdowns because more people are spending time on its service and advertisers are turning to its platform to reach those types of viewers.
One of the benefits for advertisers is that pricing on Snapchat ads has been coming down. The number of ad impressions nearly doubled year over year, while the prices of ads was down 23 percent, Andersen said. Snapchat has been having success with those advertisers that are trying to adjust to the stay-at-home audiences, catering to gaming apps, streaming services and e-commerce brands that deliver.
“We do have a unique opportunity to increase our market share as advertisers look for cost-effective ways to advertise in this environment,” said Jeremi Gorman, Snapchat’s chief business officer.
Snapchat's daily active user base rose 20 percent year over year to 229 million. The company did tell investors that it would not provide full financial guidance for the current quarter because of the uncertainties around the pandemic. But it offered an early look at the ad growth rate, so far in April.
"We estimate year-over-year revenue growth to be 15 percent through April 19, and our estimated growth rate in the most recent week is 11 percent," said Andersen in a note to investors. "Today we have less visibility into Q2's results because so much depends on factors beyond our control, principally how the world continues to manage the COVID-19 crisis and if, or when, the world's economy begins to recover."
Snapchat's business has been disrupted by the pandemic. like many internet ad companies and other industries, and the company was forced to cancel its developer conference which was scheduled for earlier this month. Instead of the in-person summit, Snapchat offered updates to its platform, like the extension it released in March that allows users in third-party apps like Triller to share videos from Snapchat.
Snapchat continues to plan for its advertising future by making new hires. This month, Snapchat poached Peter Naylor, Hulu's former head of ad sales, to lead its advertising team in the Americas.
Like many platforms, Snapchat says that users are spending more time with its services during the pandemic shutdown. Friends communications increased 30 percent in the final week of March, compared to the last week of January, the company said.