Snap Inc. Reports Best Quarter in Four Years

Snapchat’s Resurgence: Growth in Users and Revenue

Recent data indicates a growing trend in Snapchat usage. During the Q2 earnings call, Snap’s CEO, Evan Spiegel, reported that the platform experienced its highest rates of revenue and daily active user growth in the past four years.

Currently, Snapchat boasts 293 million daily active users, representing a 23% increase compared to the previous year.

Early Challenges and Recovery

Snapchat initially went public in 2017 with a valuation of $24 billion. However, the platform faced a significant setback when Instagram replicated its innovative Stories feature.

The launch of Instagram Stories led to an 82% deceleration in Snapchat’s growth. Further difficulties arose from a redesign of the app’s interface, which prompted Kylie Jenner to publicly announce her disuse of the platform, resulting in a $1.2 billion drop in the company’s valuation.

Despite these hurdles, Snapchat demonstrated resilience and initiated a recovery. Revenue peaked at $911 million in Q4 2020, before experiencing a decline to $770 million in the subsequent quarter.

Now, Snapchat’s Q2 2021 revenue has surpassed its previous record, reaching $982 million.

Factors Driving Growth

The app’s Q2 growth can be linked to the return of advertisers who had reduced spending during the pandemic’s peak.

Additionally, the platform successfully retained users who initially joined during lockdown periods. While many social media platforms benefited from increased usage during the pandemic, Snapchat’s growth isn’t solely attributable to re-engagement.

Snapchat proactively adapted to the rise of TikTok and the expanding creator economy by introducing Spotlight, a similar feature, and heavily investing in augmented reality (AR) applications.

Augmented Reality as a Key Strategy

“We made considerable advancements with our augmented reality platform this quarter,” Spiegel stated.

“On average, over 200 million Snapchatters engage with AR daily, and more than 200,000 creators utilize Lens Studio to develop AR Lenses for our community.”

Snapchat’s Cartoon 3D Style Lens recently gained viral popularity, transforming users into characters reminiscent of Pixar films.

Spiegel highlighted this lens as an example of the potential for Lenses to achieve widespread virality both within and beyond the Snapchat platform.

Beyond entertainment, Snapchat is leveraging AR to attract e-commerce partners, developing AR experiences for companies like Walt Disney World, Smile Direct Club, Zenni Optical, e.l.f. Cosmetics, and Ralph Lauren.

These experiences include virtual try-on features for items such as watches, jewelry, eyewear, handbags, makeup, and clothing.

At its Partner Summit in May, Snapchat unveiled an update enabling users to scan friends’ outfits and receive shopping recommendations for comparable styles.

“We still have substantial work to do in developing our technology and increasing AR adoption, but we are pleased with the results our partners are achieving as we invest in our long-term camera opportunity,” explained Jeremi Gorman, Snap’s chief business officer.

“We are confident in our long-term prospects and are committed to expanding shopping and commerce through augmented reality.”

Expansion into E-commerce and Beyond

In March, Snap acquired Fit Analytics, a Berlin-based startup specializing in helping online shoppers determine the correct apparel and footwear sizes.

This acquisition, combined with Snap’s investment in AR, raises the possibility of utilizing AR to assist users in selecting the appropriate clothing size.

However, the implementation of such technology requires careful consideration, particularly given the increasing rates of eating disorders among teenagers.

In addition to e-commerce, Snapchat is forging strategic alliances with entertainment companies like HBO Max and Universal Music Group, and continuing to develop its Spectacles, AR-enabled glasses.

Facebook is also pursuing AR glasses, and Snapchat’s recent successes demonstrate the growing acceptance and value of AR experiences for both companies.