Snap sales beat expectations as firm reels in advertisers
Company started shift to automated bidding for advertisements in mid-2017
SAN FRANCISCO— Don’t count Snap Inc. out just yet.
The company delivered sales that blew past analysts’ expectations, its first upbeat quarterly report since going public, as advertisers start to get more comfortable spending money on its Snapchat app. The stock jumped as much as 31 per cent in extended trading.
Snap’s first year as a public company has been marked by hurdles, including the loss of its heads of product and engineering. Facebook Inc. has copied some of Snapchat’s most popular features for bigger audienc- es, while a dramatic redesign of the Snapchat app is rolling out slowly. The numbers on Tuesday may help some on Wall Street revisit their original thesis on the company: that Snapchat, already popular with young people, has enough growth potential to carve out a solid slice of a digital ad market dominated by Facebook and Google.
“It’s been a roller-coaster mismatch between expectations and reality, but the benefits of all their initiatives are finally starting to come to fruition,” said James Cakmak, an analyst at Monness Crespi Hardt & Co.
In the middle of 2017, Snap began moving to an automated bidding process for selling ads, making it easier for more marketers to buy spots. By October, the system was mandatory. Though that dented average prices, the hit was offset by new cus- tomers and a rising number of ad views.
“This decision quickly paid off,” said Snap chief strategy officer Imran Khan during a conference call with analysts. “In three months, we more than tripled the number of advertisers spending in our auction.”
Snap said fourth-quarter sales jumped 72 per cent to $285.7 million (U.S.), beating the $252.8-million average projection of analysts, according to data compiled by Bloomberg. Snapchat had 187 million daily active users in the fourth quarter, up 18 per cent from a year ago and ahead of the 184.3 million analysts estimated.
Still, the company was beating much-lowered expectations. At the time of Snap’s initial public offering, analysts expected it could top $1 billion in revenue in its first year.