Snap's brand advertising slips in Q3

At 6%, Q3 advertising revenues grew more slowly both year-on-year and quarter-on-quarter at camera app Snap – and all of that came from direct response advertising; brand-oriented advertising declined slightly, although the business expects that to recover in Q4.

Room to grow

The number of daily active users on Snapchat in Q3 grew more than twice as fast (19%) as the number of ad impressions delivered (8%) – an indication that advertisers are not following users to the platform. 

“We’ve been demand-challenged,” acknowledged chief financial officer Derek Andersen in an earnings call, adding that “we continue to believe we have significant room to grow our advertising business”.

He also noted that growth rates had slowed markedly from the same time last year thanks to the current macroeconomic headwinds and the ease with which advertisers can turn digital performance advertising on and off.

Takeaways

• CEO Evan Spiegel identified three strategic priorities: growing the Snapchat community and deepening engagement with the platform’s products; diversifying growth; and investing in augmented reality to build “a durable competitive advantage”. 
• He added that Snap is investing in “driving scalable, lower-funnel performance for our advertising partners and making improvements to our ad platform and Auction Dynamics”. 
• A focus on the direct response business will see efforts to improve first-party measurement and make Snap’s systems work better with third-party measurement systems like Google Analytics. 
• “Advertising has become more technical as signals and measurement continue to evolve,” noted COO Jerry Hunter, who stressed the importance of “building up the connective tissue between sales, engineering and product” and of bringing in talent who can get close to customers’ needs.

 Key Q3 stats 

• Revenue increased 6% year-on-year to $1,128m; net loss was $360m (compared to $72m in the prior year).
• The number of daily active users rose 19% year-on-year to reach 363 million (North America 27%, Europe 24%, Rest of World 48%). 
• Subscription service Snapchat+ now has more than 1.5 million subscribers.
• Over 250 million people engage with augmented reality on Snapchat every day.

Sourced from Snap, Motley Fool