Snap Earnings and Users Surge with Addition of Augmented Reality Features
Snap, the parent company for Snapchat, has seen its user numbers and revenues surge in the second quarter of this year following its addition of the augmented reality filters. Customers have been apparently lapping up the AR offering on the social media platform thereby driving up revenues even though the company is yet to turn profit.
Snap’s revenues grew 48% during the second quarter of this year compared to one year earlier with the revenues hitting $388 million. Snap shares also grew 11% in after-hour trading and reached $16.50.
In three months leading to June 30, Snapchat’s daily active users surged to 203 million from 190 million in the earlier quarter of this year. This impressive performance even surpassed the analyst estimates. The positive results for user growth and revenues saw Snap post slimmer-than-anticipated losses in the second quarter.
The impressive 2019 results came on the back of a rather disappointing 2018 when users fled Snapchat in droves following a botched redesign during which some senior executives also left the company. Snapchat also faced some serious competition from platforms such as Instagram which launched its own version of disappearing messages and “stories” similar to the Snapchat offering.
Snap has only rebounded to growth in the first quarter of 2019 after investing considerable effort to attract younger people and get more users onboard on the platform.
In 2018, Snap’s share price fell to an all-time low of $4.99 but the share price has since rebounded, going past its March 2017 issue price of $17.
Snap has stated that the design improvements in its Android app had been a major factor in the growth, prompting users to send 7% more “snaps” to one another than in the older version. Snaps refer to the disappearing videos and images that users share on Snapchat.
Snapchat’s new augmented reality lenses now allow users to appear as different genders or even as cats in the snap messages. This is one of the key features that has brought back droves of users back to the portal.
According to the company statement, Snap is continuing to make major progress in reducing its underlying unit costs over time. Thee company has been able to drive down the underlying cost of delivering Snap, delivering impressions as well as other key contributors of its infrastructure costs.
Following the earnings report, Snap’s share price climbed to $16.50, just shy of the $17 debut price for the stock in 2017.
Snap expects that its Q3 revenue will be in the region of $410 million to $435 million, far outstripping analyst estimates. The company is also expecting anywhere between 205 million and 207 million daily users in Q3, which is higher than the earlier analyst predictions of 195.5 million.
Snap’s change of fortunes is largely attributed to CEO Evan Spiegel’s decision to focus on the company’s core base of younger users rather than continuing with user acquisition. The augmented reality integration into Snapchat has also roped in advertisers as the functionality has improved the engagement by allowing users to try out selfies and group photos.
This year saw Snap repeating the success of its past success with its puppy face and rainbow lenses by using a gender swap lens that allowed users to play around with how they would like if they swapped their genders and became a person of the opposite sex. There is also the baby face lens that enabled users to see how they would like if they were babies.
These lenses proved quite popular and drew in millions of users into the Snapchat’s rebuilt Android app which has offered them new and improved experiences and better engagement. The new enhancements have also allowed Snapchat to better monetize the improvements in engagement which has accelerated the company’s revenue growth.