Snap Revenue and User Growth Surpass Expectations, Upbeat Forecast for Q1

Revenue and Forecast

Snap Inc., the parent company of Snapchat, reported a 14% increase in fourth-quarter revenue to $1.56 billion, exceeding analyst estimates. For the first quarter of 2023, Snap projects sales of up to $1.36 billion, outperforming the average analyst consensus of $1.33 billion.

Advertising Revamp

Snap attributes its revenue growth to a successful revamp of its advertising business, shifting from broad-scale brand advertising to targeted ads with direct calls-to-action. This strategy has attracted small- and medium-sized marketers to the platform.

User Growth

After focusing on video content, Snapchat reached 453 million daily active users in Q4, exceeding analyst projections.

Profitability

Excluding certain items, Snap reported earnings per share of 16 cents, topping the average forecast of 14 cents.

New Ad Formats

In the past five months, Snap has introduced several new ad options, including Sponsored Snaps and Promoted Places, expanding its offerings to a broader range of advertisers, with smaller marketers contributing significantly to ad revenue growth.

Leadership Changes

Ajit Mohan, formerly Meta's President of Asia-Pacific, has been appointed Snap's Chief Business Officer to lead the growing ads business.

Video Content Strategies

To compete with rivals like TikTok and Instagram, Snapchat has promoted video content and updated its algorithm to enhance engagement. This has attracted advertisers seeking to engage with viewers spending increasing time watching videos on the platform.

New Products and Services

Beyond advertising revenue, Snap has launched new products and services, such as smart glasses and a subscription service with AI-powered features. The subscription product has garnered 14 million subscribers and is expected to generate over $500 million in annual revenue.

AI Investment

Snap continues to invest in AI and machine learning technologies to enhance ad placement and video content recommendations. The company anticipates spending approximately 85 cents per daily user on infrastructure services related to these technologies, leveraging cloud computing from Google and exploring open-source AI models.