Snap shares soared as high as nearly 17% in after-hours trading Thursday after reporting its highest rates of revenue and user growth in four years.
It's not surprising the company grew compared to the same time last year, when advertisers pulled back spending, but Snap's rosy projections for the upcoming quarter suggest the post-pandemic bump wasn't a quirk.
Snap told investors on Thursday it forecasts 58% to 60% year-over-year revenue growth in the third quarter. Share prices approached the record-highs that Snap saw in February following the company's announcement that it anticipates 50% revenue growth for the next several years.
Analysts had expected a big year-over-year jump this quarter as the pandemic subsided and advertisers spent more. Snap nevertheless exceeded expectations, hitting 293 million users and more than doubling revenue.
CEO Evan Spiegel said he expects growth to continue as Snap moves deeper into ecommerce with ongoing investments in features like AR shopping.
Analysts agree that Snap has plenty of room to further monetize that, along with other relatively new features like Maps and Spotlight, the TikTok-like, algorithmically-surfaced video feed that Snap launched in November. The company grew its Spotlight daily active users 49% quarter-over-quarter.
Spiegel told investors Snap is not ready to turn Spotlight into a revenue generator.
"We've done small testing with advertising in Spotlight but for now we're just really focused on the core experience," Spiegel said. "We've got a great roadmap of improvements and we just don't want the team to get distracted, frankly, with monetization at this point."
Snap pulled in $3.35 per user globally, beating Wall Street expectations. Still, that figure still lags behind competitors like Twitter (around $5) and Facebook (over $13). Analysts believe that, too, gives Snap room to grow.
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Bitmojis are getting an upgrade on Snapchat with a new 3-D design that rolls out Monday.
Snap Inc. is decking out its avatars with more than 1,200 combinations of poses, gestures and backgrounds like cow prints and beach locations. The new avatars are full-body designs with new "Pixar"-like quality that can be shared on and off the platform.
It comes the same day Snap confirmed that it acquired Culver City-based Vertebrae. The AR and 3-D platform helps brands and retailers translate their clothes and accessories digitally. Terms of the deal weren't disclosed. But both moves illustrate Snap Inc.'s intentions to move further into virtual fashion.
The new avatars show much more detail from stitching on outfits to the sparkle of jewelry. That level of detail could help entice brands. Already, users are able to buy some of the clothes featured on Bitmoji. With the addition of accessories, there is the potential for more revenue sources.
Snap has used Bitmoji, which it acquired from Bitstrips in 2016, as an entry into gaming, merchandise and other areas. The company has used the avatars to partner with fashion brands from Levis to Ralph Lauren. Last year, Snap made a big push into gaming with Bitmoji Paint, a game that lets users collaboratively paint a pixelated canvas. The company also announced last year it was creating Bitmoji TV.
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Snapchat users will now be able to use songs from Kanye West, Lady Gaga and Taylor Swift after Snap and Universal Music Group inked a deal that gives the social media network access to the music giant's expansive catalog.
The deal underscores the ongoing confluence of social media, music and ecommerce.
For UMG, the agreement provides an opportunity to boost exposure of its artists. The company has previously worked with Snap on a more piecemeal basis, with some of its artists' music already available on the app.
For Snap, which will use the music in its Sounds feature, the deal will help them compete with TikTok and other social media platforms increasingly reliant on music to engage users.
Sounds, launched in October, lets users incorporate songs in their video and photo posts and messages on Snapchat. Already the feature has been used in 521 million videos garnering 31 billion views, according to Snap. Nearly 45% of those were sent as direct messages, Snap said.
Olivia Rodrigo's hit song "Driver's License", which premiered in January 2021 under the UMG subsidiary Interscope label, has featured in over 10 million user-generated Snapchat videos using Sounds. Collectively those videos have been viewed over 325 million times, the companies said. Notorious B.I.G.'s 1994 hit "Big Poppa" has been included in 5 millions Snapchat creations, accumulating 108 million views.
As part of the deal, UMG will also be developing AR filters for Snapchat – which Snap calls lenses – tethered to some of its artists, according to a company statement. UMG noted that those lenses can be used to sell artist merchandise.
Terms of the deal were not disclosed, other than being described as a "global" and "multi-year agreement."
Snap and UMG have collaborated numerous times in the past. The two companies created a lens for Billie Eilish's 2016 single "Ocean Eyes." In 2018 Nicki Minaj created the first lens selling artist merchandise in conjunction with her album "Queen." And emerging artist Benee incorporated her track "Supalonely" into a lens in 2019, which has been viewed over 1 billion times.
Snap also has music deals with Warner Music Group, Sony Music Publishing and others.
Over five billion messages are shared on Snapchat per day on average, Snap said.
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