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For Snap, this quarter’s second quarter earnings were the good, the bad, and the ghosted (by advertisers, it seems).
While revenue increased 8% from last quarter and beat analyst estimates, it was down 4% year over year, marking a downturn for the second quarter in a row. Its stock tumbled shortly after the announcement.
Despite bringing in more than $1 billion in Q2, reaching a 14% increase in daily active users year over year to reach 397 million, and growing Snapchat+ subscribers to 4 million, the platform seems to be struggling to bring in the ad dollars. Some have suggested that this could be due to increased competition from platforms like TikTok, slowed ad spending overall, or changes to app privacy policies.
On the earnings call, Snap CFO Derek Andersen said that the company is in a “period of rapid transition” as it works to bolster its ad platform. He added that the company has “really rapidly” increased investment in infrastructure around content engagement, which will be a “key input to monetization over time.” Earlier this year, it expanded a creator program that lets users who meet certain requirements earn revenue from ads shown between their posts. It also recently inked a partnership with Linktree.
In May, Snap introduced new ad offerings to go along with its latest features like My AI, which it said has been used by more than 150 million Snapchat users. The company also brought on former Meta execs to run its partnerships and verticals teams and promoted CCO Colleen DeCourcy to take over for departing CMO Kenny Mitchell, who left for Levi’s.
On the call, Andersen emphasized that the platform has seen higher advertiser retention, citing a 20% increase in “active advertisers” year over year. He also noted that the company has not provided formal guidance in over a year and doing so this time around “[reflects] an increased confidence in the trajectory of [the] business.”
Still, it seems Snap’s transition period may not wrap up soon. Next quarter, the company anticipates daily active users will be between 405 million and 406 million, and expects it will bring in between $1.07 billion and $1.13 billion in total revenue, which would mean slightly negative or flat YoY growth.