In its first quarterly results since going public Snap’s revenue grew 286 per cent year-on-year but still missed Wall Street expectations.
For the quarter ended March 31, 2017, Snap reported revenue of $149.6 million, up from $38.8 million in during the first quarter of 2016. However analysts were expecting revenue of $158 million.
Shares were down more than 20 per cent after the parent company of Snapchat recorded a US$2.2 billion loss during the quarter, $2 billion of that was attributed to stock-based compensation expenses tied to its IPO.
Snap’s adjusted EBITDA loss was $188 million in Q1 2017, compared to a loss of $152 million in the fourth quarter of 2016 and a loss of $93 million a year earlier in the first quarter of 2016.
Daily active users grew from 122 million in Q1 2016 to 166 million in Q1 2017, an increase of 36 per cent year-over-year. DAUs increased 5 per cent quarter-over-quarter, from 158 million in Q4 2016.
Average revenue per user (ARPU) was $0.90 in Q1 2017, an increase of 181 per cent over Q1 2016 when ARPU was $0.32. ARPU decreased 14 per cent over Q4 2016 when ARPU was $1.05. Snap calculates its ARPU as quarterly revenue divided by the average Daily Active Users.
In terms of engagement, over 3 billion Snaps are created every day in the app, the company said. On average, in Q1 Snap users spent over 30 minutes per day on Snapchat, largely due to the increase unique content on the platform.
“We made significant progress in automating our advertising business this quarter, with more than 20 per cent of Snap Ad impressions delivered programmatically through our API. Automating our ads platform means that advertisers get better pricing, our community sees better ads and we’re able to make more money per impression,” Snap CEO Evan Spiegel said during an earnings call.
In the competition for digital ad dollars, Snapchat is still much smaller than Facebook, which has 1.28 billion daily active users and 700 million Instagram users monthly.
However, as the chart below from Statista illustrates, Snapchat is able to reach audiences that aren’t on other platforms. According to data published by App Annie last week, Snapchat has a unique audience that cannot easily be reached on other platforms. For example, only 54 per cent of daily Snapchat users in the US are active on Instagram as well.
According to Imran Khan, Snap Chief Strategy Officer, “Additionally, 87 per cent of our US daily active users between the ages of 18 and 34 cannot be reached by any top 15 TV network. Our platform allows us to engage an audience that research shows is difficult to reach. We believe that the ability to deliver this type of reach and engagement is the cornerstone of a great advertising business.”