Snap Surges as Earnings Beat Expectations, Users Continue to Climb
Tami Abdollah is dot.LA's senior technology reporter. She was previously a national security and cybersecurity reporter for The Associated Press in Washington, D.C. She's been a reporter for the AP in Los Angeles, the Los Angeles Times and for L.A.'s NPR affiliate KPCC. Abdollah spent nearly a year in Iraq as a U.S. government contractor. A native Angeleno, she's traveled the world on $5 a day, taught trad climbing safety classes and is an avid mountaineer. Follow her on Twitter.
Snap Inc. beat analyst expectations Tuesday when it reported earnings for the first quarter of 2020, seeing its stock surge 17% in after-hours trading.
The social media and self-described camera company saw its revenue increase 44% year-over-year to $462 million amid the economic recession caused by the novel coronavirus pandemic. The Santa Monica-based company also saw daily active user growth increase by 20% year-over-year, or by 39 million, with 229 million users.
"We are seeing sustained communication volumes on our service that eclipse the peaks we see during major holidays," said CEO and cofounder Evan Spiegel during Tuesday's earnings call. "For example, communication with friends increased by over 30 percent in the last week of March compared to the last week of January, with more than a 50 percent increase in some of our larger markets. Snapchat has always been focused on helping people build and maintain their friendships, which is especially critical as people practice physical distancing and shelter in their homes."
Snap's last reported earnings and forward-looking estimates were in February before most countries outside of China had been hit by COVID-19. The move into economic recession has been especially challenging for Snap's advertising partners, which has impacted the company's growth rate, the company said. While year-over-year growth was roughly 58% in January and February, it declined to about 25% in March. In North America, revenue grew 40% year-over-year in Q1, a small drop from 42% in the prior quarter.
Yuval Ben-Itzhak, CEO of Socialbakers, a social media marketing platform, said Snap's strong Q1 earnings are a pleasant surprise but warned that because COVID-19 hit late in Q1, "Snap is likely not to have seen such a great impact on its ad revenue. It will be Q2 when they feel the true impact on their business."
Ben-Itzhak noted that because Snap is not the primary method for brands with big ad budgets and is more experimental, the platform is more vulnerable to budget cuts than other social media platforms.
Because of the rapidly changing environment caused by the pandemic, the company's Chief Financial Officer Derek Andersen said it wouldn't share financial guidance for Q2 such as revenue or adjusted EBITDA guidance.
As people have turned to videoconferencing and live streaming, the company said it's seen 30 times the increase in daily downloads of their Snap Camera, a desktop app that allows people to add Lenses -- Snap's augmented reality additions -- to video services they are using.
Snap has launched new products and features specifically in response to COVID-19, including what it says is its first-ever fundraising AR Lens to drive donations from 33 countries to the World Health Organization's COVID-19 Solidarity Response Fund. The effort uses its Scan camera search technology to recognize 23 currency notes and to trigger different lenses per currency to visually show money being "raised" and transformed into the three pillars of the fund, namely, the image of a hospital for patient care; a mask for medical supplies; and beakers that represent research and development.
Snap also added a new feature called "Here For You" that provides proactive in-app support to users who may be experiencing a mental health or emotional crisis, or want to learn more to help friends, Spiegel said. The company has also published more than 700 Discover editions with coverage on COVID-19 developments from content partners, in-house news teams and agencies like the Centers for Disease Control and Prevention and the WHO.
Snap benefited from users engaging more with its "Discover" content, which includes various Hollywood content partners and brand marketers -- as overall ad revenue has dropped elsewhere. Users watching Discover content increased more than 35% year over year. It has also added new original content like the docuseries Nikita Unfiltered.
Spiegel said the company has seen a "sharp increase" in group-related activities like chat and games. The company launched five new games in Q1, and saw average daily time spent playing games more than double in March -- as the pandemic forced people to stay in their homes.
The company still has a negative free cash flow of $5 million, though it improved by $73 million.
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Minutes into filling out my absentee ballot last week, I was momentarily distracted by my dog Seamus. A moment later, I realized in horror that I was filling in the wrong bubble — accidentally voting "no" on a ballot measure that I meant to vote "yes" on.
It was only a few ink marks, but it was noticeable enough. Trying to fix my mistake, I darkly and fully filled in the correct circle and then, as if testifying to an error on a check, put my initials next to the one I wanted.
Then I worried. As a reporter who has previously covered election security for years, I went on a mini-quest trying to understand how a small mistake can have larger repercussions.
As Los Angeles County's 5.6 million registered voters all receive ballots at home for the first time, I knew my experience could not be unique. But I wondered, would my vote count? Or would my entire ballot now be discarded?
My distractingly sweet dog, Seamus.
Photo by Tami Abdollah
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