Snap Inc’s shares jump by 23% on Tuesday as its daily active users and revenue grew, exceeding analysts’ estimates. It is the parent of the short messaging app, Snapchat.
Snap’s shares jump by 23% as its daily active users rise 18% to 249 million
The daily active users (DAUs) rose by 18% year over year to 249 million for the quarter ending on Sep. 30, as more people signed up to the messaging app amid the coronavirus pandemic. The analysts had estimated a growth of 244 million.
In a statement, the company said that it expected this continued momentum in user growth and estimates about 257 daily active users in the fourth quarter, exceeding the analysts’ estimate of 249.81 million. Selling ads contribute to the revenue jump by 52% to $679 million, beating the analysts’ estimate of $555.9 million.
Snap positioned as a safe place for ads as its one-to-one messages disappear once read
Snap CEO Evan Spiegel stated that they are excited about the growth in their business in Q3 and will continue with long-term investments for the future. He further said that augmented reality (AR) in business is happening faster than expected, and they are working together to execute on these opportunities.
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The short messaging app has been responsible for the popularity of AR with camera filters. It allows users to transform into an anime character, change their hair color, or integrate effects into their selfies. Also, it focuses on one-to-one messages that disappear once read. Hence, it is positioned as a safe place for advertisements.
It served Snap well in the third quarter when close to 1000 advertisers steered clear of its rival Facebook Inc in July. It was in response to the hate speech on the platform as a popular short video app Tik Tok faced a potential US ban over the concerns of national security.
Snap’s average revenue per user was $2.73, 27% higher than the year-ago quarter
Taking notice of this opportunity, Snap provided unique ad offerings like augmented reality advertising as companies reviewed their ad spend. These unique offerings helped to contribute to its revenue growth. The average revenue per user was $2.73, growing by 27% from the year-ago quarter. The company said that its current-quarter revenue could grow between 47% to 50% over a year-ago period. Although, it said that it was unclear how the pandemic would affect its year-end holiday advertising.
Snap has been successful in growing its user base outside of the United States and Europe by working together with the local telecommunication service providers. It has in-built features like photo filters and lenses that relevant locally.