Snapchat has released its most recent performance report. It indicates a strong promise in terms of continuous usage growth, but also some substantial revenue issues.
To begin with, Snap attracted 8 million additional total daily actives in Q1, bringing the total to 383 million daily users.
Snap’s growth is flat in the US and EU, but it is increasing in the ‘Rest of World’ category, with Indian users warming to the app.
As connectivity and accessibility increases in the region, Snap is expanding its footprint, but its revenue is not as great. This bodes well for its prospects.
Snap saw a decline in revenue for the quarter, bringing in $989 million.
As explained by Snap:
“Q1 revenue was particularly challenged, as we implemented significant changes to our ad platform that were disruptive to demand. While the macroeconomic environment has shown signs of stabilization, it continues to be a headwind to growth. Our brand-oriented business was down 12% year-over-year and our direct-response (DR) business was down 9% year-over-year.”
Snap is improving its ad performance, but its charts are not looking great.
The company’s income in the US and other markets is significantly different.
Snap’s system costs are increasing, making the situation worse.
Snap has managed to reduce some of these impacts by cutting staff, but its infrastructure expenses continue to rise.
Spotlight, its TikTok-like feed of short-form video content, has seen significant growth, with more than 350 million monthly active users engaging with it, up 46% year-over-year.
This is a key element that Snap will need to manage as it looks to rationalize its business.
The growth of short-form video is part of a shift away from social elements and towards entertainment. Users spend more time in apps but interact less and tap through on posts at lower rates.
This is a key trend from a marketing perspective, as it points to the importance of creating content that focuses on entertainment, not on driving referral traffic.
Snapchat+, its subscription add-on element, is now up to 3 million paying subscribers.
Snap’s 750 million active user base (MAU) signed on to Snapchat+, resulting in an extra $36 million in direct payments.
This is likely worth the effort of maintaining the offering, but it pales in comparison to the $989 in total revenue that Snap generated in the quarter.
Until these numbers get close to each other, subscription elements like this will remain a minor consideration.
Snap’s ARES third-party AR development platform enables businesses to use Snap’s AR tools in their own apps and processes.
Snap launched ARES late last month, but the idea is to remain a leader in the AR space.
If AR glasses become a thing, Snap will hold its ground in the sector, even if it isn’t able to release its own AR Spectacles.
Snap is still developing its AR glasses, and has also dealt with staff cuts, but is still working on the next stage of its Spectacles offering.
Snap’s report card is not great. But it is in line with expectations, given the broader economic impacts.
The market is unlikely to be more understanding as a result, but the numbers do fit into Snap’s projections.
It is not a great time for Snap right now.
