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What we learned from Snap’s Q1 earnings

Snapchat’s parent company, Snap Inc., recorded a revenue of USD 149.6 million in the first quarter of 2017. The company, which filed its IPO in March, saw a growth of 286 per cent year-over-year in revenue, driven primarily by strong advertiser demand.

Evan Spiegel – Co-Founder and CEO, Snap Inc. said in the earnings call, “During the first quarter, we focused our efforts primarily on the performance and quality of our Snapchat application and automation across our content products and advertising business. We’re pleased with the early results from these performance and quality improvements, particularly on Android devices. These improvements helped drive a significant increase in engagement, with now over 3 billion Snaps created every day with our cameras, generating an increase in overall sessions and time spent.”

Digital Market Asia curates key takeways from the ‘camera’ platform’s much-anticipated first earnings report:

1) Its daily active users growth rate is slowing quarterly
Snapchat now has 166 million users in Q1 2017, showing a growth of 36 per cent y-o-y from 122 million in Q1 2016. However, compared quarter-over-quarter, the growth was at five per cent , from 158 million in Q4 2016. The quarter-over-quarter growth rate has been on decline since Q3 2016. This could be due to its rival Facebook copying its Stories and Camera features for its family of apps. In comparison, Facebook’s Instagram has recently reached 700 million monthly users and 150 million daily users for its Stories feature.

Mr Spiegel however dismissed any concerns about Facebook’s growth and focus on augmented reality and Camera will ‘scare’ him in the earnings call and said, “If you want to be a creative company you’ve got to get comfortable with and basically enjoy the fact that people are going to copy your products if you make great stuff.”

“We’ve seen this happen a lot in technology. When Google came along, everyone really felt like they needed a search strategy. When Facebook came along, everyone felt they needed a social strategy. And now I think with Snap, with our company, we believe that everyone is going to develop a camera strategy. Because I think we really help people understand how valuable the camera is, because it’s really the center of everything that we do. And I think, at the end of the day, just because Yahoo, for example, has a search box, it doesn’t mean they are Google,” he added.

2) North America leads for number of users; Europe follows
In Q1, Snapchat more than doubled the number of new users coming from Android devices compared to Q4 2016. Android users accounted for over 30 per cent of net additional users this quarter, up from 20 per cent last quarter.

Regionwise, North America continued to lead the revenue for the social media platform which stood at USD 128.7 million in the first quarter, up 259 per cent y-o-y. Europe followed at the second place with revenues recorded at USD 13.1 million, up 385 per cent year-over-year.

3) Rest of the world, including APAC, still lags behind
The revenues for the rest of world was at USD 7.8 million, up from only a couple hundred thousand dollars, a year ago.

Discussing why the rest of the world region is not catching up, Mr Spiegel said in the earnings call, “I think the connectivity issue is a real problem in the developing world, because it really changes the use case of our service and the behavior of people that use Snapchat. In certain developing world markets, people tend to use their WiFi at home or in an Internet Cafe because the broadband cell service is so expensive. And what that means is that you can’t use Snap to communicate in the moment. You have to go use Snap at a wireless Cafe. And that turns Snap into much more of a broadcast, lean back kind of service.”

“So I think we can invest in growing those sorts of products in those markets. But the way that our service works, I think, is by empowering this sort of visual communication. And that is just really tough if you don’t have cell service wherever you go,” Mr Spiegel added.

4) In Q1, time spent on Snapchat for each user is over 30 mins
In the earnings call, Imran Khan – Chief Strategy Officer, Snap Inc. highlighted that the time spent on the camera platform continues to grow.

“On average, in Q1 our users spent over 30 minutes per day on Snapchat. This past quarter, we told over 450 Our Stories in over eight languages to our global community.Our expert teams curate Snaps submitted by Snapchatters around the world’s biggest moments, such as breaking news, entertainment, and sports. In February, Our Story coverage of the Oscars received over 250,000 submissions from Snapchatters. Over 21 million global unique viewers tuned in to watch our Oscars coverage,” Mr Khan explained.

Shubhi Tandon

Shubhi Tandon is the Assistant Editor at Digital Market Asia. Fascinated by the evolving digital media industry, she has focussed on tracking developments in the Asia Pacific market since 2014.