Snapchat is growing up.
Well, its ad tech is, at any rate. The youthful makeup of Snapchat’s user base is still one of its biggest selling points for advertisers.
But competing against Facebook, Google and even Twitter for direct response dollars requires a big investment. DR spending was up during the pandemic across most large platforms, but Facebook and Google both had a massive head start.
“Our ad tech is at parity with the largest players,” Jeremi Gorman, Snap’s chief business officer, told investors on Thursday during the company’s earnings call. “It’s table stakes with goal-based bidding [and] with pixel-based conversions – and we’re going to continue to invest there.”
Gorman noted that the number of active advertisers on Snapchat approximately doubled year-over-year in Q1. Upfront commitments from brand advertisers for Snapchat’s Commercials ad format during the first quarter more than tripled after doubling in 2020.
Yet there’s still room at the inn.
Snapchat remains “more demand constrained than supply constrained,” said CFO Derek Andersen.
Snap knows what it’s got to do to attract more advertisers, including small businesses: continue to improve the user experience and prove return on investment to ad buyers.
Snap’s ongoing investment in augmented reality is a bid to tick both boxes.
“Brands have learned how to utilize augmented reality to drive real business results,” Gorman said. “One of our goals is to combine AR experiences, like fit and try-on, with personalization and customers’ preferences to vastly improve the shopping experience, while driving purchases and reducing returns.”
Advertisers appear to like the vision.
Snap’s total revenue for Q1 was $770 million, up 66% year-over-year. Average eCPMs were up 67% YoY driven by a combination of improved optimization capabilities in Snapchat’s auction, a mix shift toward relatively higher eCPM products such as un-skippable 6-second video “Commercials” and strength in North America.
Daily active users clocked in at 280 million, a 22% increase YoY across both iOS and Android. Snapchat’s Android user base is now larger than its iOS user base.
Speaking of iOS, though, Snap’s solid quarter was helped along by the fact that Apple’s iOS 14 privacy changes didn’t hit in Q1 as expected.
During Snap’s Q4 earnings call, Andersen estimated that the company would lose anywhere between $50 million and $70 million in adjusted EBITDA during the first quarter due to interruptions in demand, which didn’t end up happening … yet.
But putting aside the fact that Apple will finally start enforcing its AppTrackingTransparency framework next week, Snap is “cautiously optimistic that the operating environment will continue to improve,” Andersen said.
Snap’s guidance range is for revenue of $820 million to $840 million for Q2, which would represent roughly 80% to 85% YoY growth.
“It is not clear yet what the longer-term impact of the iOS platform changes may be for the topline momentum of our business, and this may not be clear until several months or more after the changes are implemented,” Andersen said. “Until then, we remain focused on helping our partners navigate these changes while optimizing return on ad spend across our advertising products and platform.”
