Even though most of Snap's potential advertisers have no clue how to use Snapchat, the company forecasts multiple years of 50% revenue growth.
That was the big takeaway from Snap's first ever Investor Day on Tuesday. Following a banner year that saw the company's stock price more than quadruple, the market continues to like what it sees. Snap's shares were up 11% by market close and the company surpassed a $106 billion market cap.
<p>Yet to keep pace with the market's optimism, analysts say Snap's challenge will be in monetizing its 265 million users who check in on the app an average of 30 times a day. And key to that is educating advertisers about how Snapchat works. </p><p>The nine-year-old public company's flagship app is a hit among young people – reaching 90% of 13-24 year-olds in the U.S. – but as its usage declines with age, so does familiarity with how it works.</p><p>"We are selling to an audience oftentimes who don't use Snapchat on a day-to-day basis," said chief business officer Jeremi Gorman in a question and answer session at the tail end of the three-hour virtual event. </p><p>It's helpful that over the past few years Snap has focused on "tightening up the product," said KeyBanc analyst Justin Patterson. That effort has included adding several new features and reorganizing the user experience. </p><p>On Tuesday, chief executive Evan Spiegel said the company's future innovation will now transition into growing around the five "core building blocks" of its Camera, Chat, Stories, Maps and Spotlight features. </p><p>Last summer, Snap added a toolbar on Snapchat to help users navigate across these five features. Numerous executives emphasized Tuesday that these features are at various stages of maturity, and therefore represent different opportunities for the company's growth. </p><p>Explaining Snap's rosy revenue projections, Chief Finance Officer Derek Andersen said the biggest near- and medium-term opportunities are in the Camera (he called AR lenses a "multibillion dollar opportunity") and Stories (the widely copycatted chronological images and videos that Snap pioneered, and which Andersen said includes Snapchat's curated content feature, Discover). </p><p>In the longer term, Andersen said Maps are another "multibillion dollar opportunity" to connect local businesses to users. Spotlight is also in its early stages, as the TikTok-like feature launched just a few months ago. </p><p>Andersen added that Snap's relatively low average revenue per user compared to competitors like Twitter and Facebook offers reason for optimism.</p><p>Furthering the case, Gorman noted that although Snap reaches nearly half of all U.S. smartphone users, it captures less than 2% of the $142 billion U.S. digital advertising market – which, she said, emarketer has forecasted to grow at 14% per year. </p><p>Recognizing that educating advertisers on how Snapchat works is its biggest hurdle, in August the company ran its first business-facing marketing campaign. Chief Marketing Officer Kenny Mitchell said the campaign, alongside Snap's other efforts to train marketers, has resulted in more advertisers completing Snap's business-education certification over the past seven months than in the prior three years combined. </p><p>Still, whether Snap wants to lure more companies to spend money on the six-second unskippable ads that appear in between Stories, set up a listing on Maps or showcase a brand or highlight a sale with an AR lens campaign, the self-styled camera company out of Santa Monica remains in translation mode. </p><p>Toward the end of the event, Gorman walked analysts through a hypothetical example of how her team tries to help advertisers understand how the young people that they're trying to reach use Snapchat. </p><p>"Open your phone," she said. "What apps do you see that you use the most?"</p><p>Most of the time, she said, the response is some combination of messaging, camera and map. </p><p>"For this generation, for 13 to 34," her demo continued, "those things are all together in Snapchat." </p><p>Moving forward, there "is a major [monetization] opportunity for [Snap]," said Piper Sandler analyst Tom Champion. "It just remains to be seen whether or not they can do it."</p>
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Snap announced it snagged a high-level Facebook employee to help lead the company's ongoing efforts to lure more advertisers to its platform.
Doug Frisbie had been on Facebook's marketing team for 11 years, most recently as head of business marketing in North America. He now becomes Snap's VP of Business Marketing, the company announced Wednesday.
<p>Frisbie will report to Snap's CMO, Kenny Mitchell. He is tasked with driving marketers, agencies and businesses toward Snap and its 265 million users. </p><p>On its earnings call last week, Snap executives highlighted several areas they view as key growth opportunities – which Frisbie will now be tasked with undertaking. These include Snap's Maps, AR lenses and Discover content features. The company also reported 200 million users engage with Snap's augmented reality features every day and 90% of the U.S. Gen Z population watched Discover content in the final quarter of 2020.<br/></p><p>The move comes as Snap's share price has soared of late to all-time highs and the company continues to inch toward profitability. To help it get there, Snap launched its first marketing campaign specifically targeting businesses in August.</p>
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Snap added millions of new users last quarter — its largest increase in years — beating Wall Street expectations of growth and revenue.
Riding a wave of increased digital ad-spending and the pandemic's ongoing limitation of leisure activities, Snap added 16 million users and pulled in $911 million in revenue in the fourth quarter of 2020.
<p>Despite the growth, share prices plummeted as much as 11% in after-hours trading on a lower-than-expected profit forecast for the first quarter of 2021. Analysts had expected a first-quarter profit projection of around $19 million, but Snap reported an anticipated EBITDA loss of between $50 million and $70 million. </p><p>Explaining the underwhelming forecast, Snap Chief Financial Officer Derek Anderson pointed to temporary advertising pauses in the first two weeks of January following the U.S. Capitol riot and uncertainty stemming from Apple's upcoming iOS privacy rule-changes, which are slated to take effect late in the first quarter and could depress ad spending. But, he pointed out that the number of advertisers on Snapchat doubled in the fourth quarter over the previous year and that a continuation of recent momentum could change the first-quarter outlook.</p><p>Over 90% of the U.S. Gen Z population watched Snap's curated content in the fourth quarter, the company said, and more than 200 million users engage with Snap's AR every day on average.</p><p>Snap's global daily active users climbed to 265 million, its largest increase since the second quarter of 2016. That beat consensus Wall Street expectations by about 7 million. Overall revenues of $911 million also beat analyst forecasts of around $856 million. </p><p>Meanwhile, the company made $3.44 per user globally, which lags competitor Facebook by nearly $7. That gap has given analysts reason to believe that <a href="https://www.cnbc.com/2020/11/03/facebooks-average-revenue-per-user-leads-social-media-companies.html?source=content_type%3Areact%7Cfirst_level_url%3Aarticle%7Csection%3Amain_content%7Cbutton%3Abody_link" rel="noopener noreferrer" target="_blank">Snap has plenty of room to further monetize</a> its user base. </p><p>Snap has said it offers advertisers innovative opportunities to reach a coveted younger demographic via its AR "lens" technology and Discovery content platform. The company has recently partnered with brands like Gucci and Champs Sports to enable "virtual try-ons" as retailers increasingly look to tech to adapt to the post-pandemic world.</p><p>"We've seen a lot of acceleration in demand for AR advertising and it's a trend we don't see going backwards," said Chief Business Officer Jeremi Gorman, pointing to Snap's plans to invest "heavily" in making it easier for advertisers to build lenses via Snap's <a href="https://dot.la/snap-lens-fest-2649417429.html" target="_self">lens studio</a>. </p><p>In addition to AR and content, Snap has also been <a href="https://dot.la/snap-2647794202.html" target="_self">ramping up</a> its <a href="https://dot.la/bitmoji-paint-snaps-latest-game-allows-millions-of-users-to-play-2649482261.html" target="_self">gaming division</a>, which could provide further revenue expansion through both advertising and in-app purchases. It continues to look to its Maps feature as a future moneymaker as well. Noting that they are used by 200 million users, CEO Evan Spiegel said Maps offers a "substantial revenue opportunity" from small- and medium-sized local businesses, particularly once the pandemic subsides.</p><p>Entering Thursday, Snap's share price had climbed 260% over the previous year. </p>
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