Snap Surges as Earnings Beat Expectations, Users Continue to Climb
Tami Abdollah
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.
--
Do you have a story that needs to be told? My DMs are open on Twitter @latams. You can also email me, or ask for my Signal.
From Your Site Articles
- Snap Stock Down After Earnings Report - dot.LA ›
- Snap Beats Expectations, Up 17% Year Over Year - dot.LA ›
Related Articles Around the Web
Subscribe to our newsletter to catch every headline.
Hamet Watt, co-founder and former chairman of MoviePass and a board partner at Upfront Ventures, quietly launched a new venture studio, Share Ventures, earlier this year in Playa Vista with $10 million in funding. Now he is ready to share details, including plans to launch several companies a year – all focused on human performance, or what is usually referred to as wellness.
"We like to use human performance because it expands the definition," Watt told dot.LA. "It's not just things like yoga. It's sports tech, behavior science and human optimization."
<p>Unlike a traditional VC firm that invests in other founders, a venture studio starts companies of its own. The small team at Share includes academics, scientists, and engineers, and counts IdeaLab's Bill Gross and former Nike president Trevor Edwards as advisors. Funding comes from Upfront, Alpha Edison, John Callaghan and Phil Black of True Ventures, Ahmed Al Mosa of the Abu Dhabi Investment Authority, and Art Coppola, former CEO of Macerich. </p><p>Watt says he has long been drawn to human performance because he sees a lot of untapped opportunities, which have only increased with Covid-19.</p><p>"In this post-Covid world a light is shining more brightly on all these things that need to be reimagined," Watt said. "There are opportunities in mental health that are much more acute than they've ever been."</p><p>Los Angeles has enjoyed a longstanding reputation as a place where wellness is prized and lately that has been reflected in startups like Headspace and FitOn that provide on-demand meditation and fitness classes. "There is a tribe in this L.A. community that is passionate about health and wellness," he said.</p><p>Watt says he is the only Black person he knows of running a venture studio and he says by virtue of his diverse network he can tap into talent others may have overlooked.</p><p>"You can't make money doing the same thing everyone else does," said Watt. "You can't fish in the same talent pond that everyone else does."</p><p>Watt co-founded MoviePass in 2011 and departed in the beginning of 2018, before the company flamed out <a href="https://www.theverge.com/2019/9/19/20872984/moviepass-shutdown-subscription-movies-helios-matheson-ted-farnsworth-explainer" target="_blank">in the fall of 2019.</a> "I exited before the really crazy drama," he said. </p><p>The company, which offered unlimited trips to the movie theater, <a href="https://www.wwltv.com/article/news/nation-world/one-movie-a-day-for-995-a-month-moviepass-seems-too-good-to-be-true/507-464863770" target="_blank">delighted consumers</a> and<a href="https://www.theverge.com/2017/12/15/16781208/moviepass-hollywood-film-subscription-service-amc-terrified" target="_blank"> terrified theater owners</a>. Watt says he is now looking for similar all-you-can pricing plans that can work in wellness.</p><p>"I think some of the experience I've had with subscription models can apply to areas in interesting ways," Watt said. "Consumers love an unlimited value proposition."</p>
Read more
Show less
HopSkipDrive, the ridesharing company for kids and one of Los Angeles most visible startups, laid off staff Tuesday as the pandemic ravaged growth plans.
Co-founder and CEO Joanna McFarland would not say how many of the 100-plus employees she laid off but told dot.LA that after delivering the news to the group affected over Zoom, managers held one-on-one meetings to review benefits and severance pay. Several departments were impacted including operations, branding, sales and customer support.
<p>The latest round of layoffs follow an earlier one in March in which the company cut 10 percent of its staff, according to<a href="https://layoffs.fyi/tag/hopskipdrive/" target="_blank"> layoffs.fyi, a website tracking job loss. </a></p><p>"One of HopSkipDrive's core values is 'feel it', meaning empathy," McFarland said. "It was very important to us to show empathy to all employees and to communicate directly with both employees who were impacted and those that were not impacted."</p><p>The six-year old company, that's raised roughly $98 million, spent the summer building COVID-safe standards to prepare for an abnormal school year. Then, one after the other, school districts across the country changed plans from in-person or hybrid classes to a completely virtual curriculum.</p><p>"Schools closing has a direct and significant impact on our business," McFarland told dot.LA by email.</p><p>"These reductions are not in any way reflective of work performance but were unfortunately necessary due to the impact COVID-19 has had on our business, like many others," McFarland <a href="https://www.linkedin.com/posts/joannamcfarland_today-i-made-the-difficult-decision-to-lay-activity-6699105478603108352-Rr1W/" target="_blank">wrote on LinkedIn</a> in announcing the decision. </p><p>Companies have been careful about letting go of workers remotely after startups like the e-scooter service Bird soured relationships with former employees after a <a href="https://dot.la/bird-layoffs-meeting-story-2645612465.html" target="_self">poorly planned layoff round</a>.</p><p><span></span>McFarland said that demand for this service will surge once schools reopen because it offers socially-distanced, safe transportation for schools looking to limit bus capacity. </p><p>"Schools will need to prioritize the students we primarily serve more than ever — students with special needs, students experiencing homelessness and students in the foster care system," she said. "These are the students who are likely to have the biggest learning gaps due to Covid."</p><p>LAUSD begins its entirely virtual school year on August 18.</p><p>"Schools will come back, and when they do, we are poised to take off. We will be in a position to create more opportunities for kids, for CareDrivers, for families and for our team than ever before."</p><p>Until that happens, McFarland says the company will continue operations with its partners in markets that have opened schools. It'll also support seniors with mobility needs and partners looking to use the service to fulfill meal and technology deliveries.</p><p>McFarland and two other L.A. working moms founded HopSkipDrive in 2014 to help parents juggling hectic schedules. Unlike rideshare companies that bar underage riders, HopSkipDrive was designed for children as young as six. </p><p>In February, HopSkipDrive announced a $22 million funding round to expand its operations in new cities, <a href="https://dot.la/hopskipdrive-ridesharing-company-for-kids-doubles-fundraising-2645031261.html" target="_self">dot.LA reported</a>. Months before, in November of 2019, the company relocated its office to ROW DTLA and began a sizable hiring push across departments. </p><p>The service, now offered in 14 markets across eight states and Washington D.C., is expanding to Midland, Texas this coming school year to support Midland Independent School District.<br/></p>
Read more
Show less
RELATEDEDITOR'S PICKS