Snap shares surge as restructured digital advertising strategy pays off
Snap Inc.'s restructured digital advertising strategy is yielding positive results as evidenced by the company's latest forecasts. Snapchat's parent said its sales are anticipated to climb by up to 18% to $1.26 billion in the period ending in June, surpassing analysts' average estimate of $1.21 billion. Following this news, Snap shares surged over 20% during after-hours trading. CEO Evan Spiegel has been instrumental in this turnaround, having spent the last two years restructuring the company and transforming its advertising business.
Snap's first quarter revenue reached $1.2 billion
Snap's first quarter revenue reached $1.2 billion, marking a 21% increase from the same period last year when significant changes were being made to its digital ad offerings. The company also reported adjusted earnings before interest, tax, depreciation and amortization of $45.7 million, a stark contrast from less than $1 million a year earlier. This far exceeded analysts' projected loss of $67.6 million.
Snap's shares surge after-hours trading
Snap's shares reached a high of $15.04 in after-hours trading, following a close at $11.40 in New York. This surge coincided with news that the US government is considering banning or forcing the sale of TikTok, one of Snap's main competitors. The company has been focusing on expanding direct-response ads, which have attracted an 85% increase in small- and medium-sized businesses advertising on the platform compared to last year.
Snapchat users spent 125% more time watching Spotlight
Snapchat users spent 125% more time last quarter watching Spotlight, Snap's scrollable feed of videos similar to TikTok. The company recorded 422 million daily active users in the quarter ended March 31, a gain of 10% from a year earlier. Furthermore, the company projected 431 million users in the current period, surpassing analysts' average estimates. "Our large, growing, and hard-to-reach community... have made us an increasingly important partner for businesses of all sizes," Spiegel said in a statement.
Snapchat+ recorded over 9 million paying users in Q1
Snap's subscription service, Snapchat+, recorded over 9 million paying users in the first quarter, tripling the number from last year. "The most important strategic priority we set out for 2024 is accelerating and diversifying revenue growth," Spiegel said on a conference call after the results. The company continues to invest in machine learning, augmented reality, and artificial intelligence technology to enhance its digital ad offerings, planning to spend between 83-85 cents per user each quarter on tech infrastructure.
