Snap targets growth with SMEs
Snap reported year-on-year revenue growth of 21% in Q1 in its latest financial results, including 15% growth in ad revenue.
The company also posted adjusted Ebitda (the company’s measure of profit) of $46m — a sharp uptick compared with $1m in Q1 2023.
These improved financial figures came as Snapchat added 39m daily active users compared with a year earlier to reach 422m (+10%). This includes more than tripling the total number of subscribers to Snapchat’s premium service tier, Snapchat+, which now has over 9m subs.
Users are in particular spending more time watching Snapchat’s short-form video player, Spotlight. Total time spent watching Spotlight content more than doubled (+125%) year on year, thanks in part to the addition of 1,500 new “Snap Stars” (professional creators), who have generated growth in content posts on the platform.
Snap has invested in new tools for these creators, such as creative templates and the ability to post longer videos.
Analysis: Chasing the long tail
“The value we provide our community and advertising partners has translated into improved financial performance,” said CEO Evan Spiegel. “Our large, growing and hard-to-reach community, brand-safe environment and full-funnel advertising solutions have made us an increasingly important partner for businesses of all sizes.”
The “businesses of all sizes” part is particularly true given Snap reported the number of small and medium advertisers on Snapchat increased 85% year on year.
On an episode of The Media Leader Podcast, Kate Scott-Dawkins, GroupM’s global president of business intelligence, noted that for some of the biggest social media and tech companies, relative dominance among small and medium advertisers is a core component of their success.
“Small and medium businesses — these are direct buyers, rather than agencies and large advertisers — are a majority of revenue for companies like Meta and Google and Amazon,” she explained. “And the self-service mechanisms that [those companies] have been able to put in place make it very easy for companies like small businesses.”
Scott-Dawkins continued: “Small businesses don’t have big marketing teams. They want something easy that they can set and go in and do themselves without a lot of knowledge, necessarily, about the wider advertising industry. So that’s really helped them gain ground and pick up that long tail of advertisers.”
Podcast: Does Snapchat want to be a destination for news? With Snap’s Lucy Luke
Snap chief financial officer Derek Andersen called the company’s broadening base of advertisers “really exciting”.
“There’s a journey that you’re going to see advertisers go through in terms of one coming on to the platform, initial testing seeing performance with some of these scaled self-serve products and then being able to grow and optimise,” he said.
Andersen added: “Over the long term, the small and medium-sized customer base is going to be an absolutely critical ingredient to reaching the full monetisation potential of the business.”
Improving experience
Snap has also made a number of recent moves to improve the ad experience for buyers. Earlier this month, Snap announced a partnership with cloud company Snowflake, which has integrated its Marketing Data Cloud with Snap.
The integration will enable marketers to more quickly implement Snap’s Conversions API (CAPI) solutions, which offer advertisers privacy-conscious performance measurement.
Snap also moved to improve its CAPI and “collaboration with advertisers” within the past year, which the company cited as reason for its CAPI integrations tripling (+300%) compared with a year ago.
In addition, Snap has sought to address brand-safety concerns on its platform, both through a first-party tool it is testing to allow advertisers greater control over where their ads appear and a partnership with Integral Ad Science, announced last month, to provide advertisers with increased transparency across their campaigns on Snapchat.