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Snap Inc Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- Revenue increased by 14% YoY to $1.56 billion in Q4, driven by progress in the direct response advertising business and the growth of the Snapchat+ subscription business.
- The company is focused on innovating and enhancing its core product experience while continuing to invest in the future of augmented reality.
- The company saw a 40% increase in the number of creators posting to Snapchat in Q4 and reached 1 billion public posts a month on Snapchat.
- The company is committed to leveraging the unique ways its audience engages with Snapchat and delivering actionable, differentiated insights to empower advertising partners and agencies.
- The company is committed to fostering a dynamic and original content ecosystem on Snapchat, prioritizing authentic creators and timely original content.
- Adjusted operating expenses were $612 million in Q4, up 4% YoY.
- Brand oriented advertising revenue was down 1% YoY, driven by continued weakness concentrated among a relatively small group of large clients focused largely in North America.
- Lower personnel costs were partially offset by increases in legal costs, including litigation and regulatory compliance related costs, as well as higher product related research and development costs.
- Higher legal costs associated with litigation and compliance are expected to contribute to adjusted operating expense growth.
- Engagement losses are seen with a cohort of users who come to Snapchat for the stories page, for the current tile-based layout to the creators and publishers that they love.
- Adjusted operating expenses are expected to be between $2.7 billion and $2.75 billion.
- Infrastructure cost per DAU is expected to be within a range of $0.82 to $0.87 per quarter in 2025.
- The company expects to start at the low end of the range in Q1 and progress to the higher end of the range as it moves through the year, driven by planned investments to move toward even larger models and near real time model refreshes.
- The company anticipates making further commitments over time to support communities and team members impacted by the recent wildfires.
- The company expects revenue to be in the range of $1.325 billion to $1.36 billion in Q1.
Q&A Highlights from Snap Inc Earnings Call Q4 2024
- Analyst asked about the early results of Simple Snap and its impact on user and advertiser budgets.
- The company is seeing encouraging testing results, especially with engagement metrics like increased content active days. They are focused on migrating story ad demand to the in-feed or Sponsored Snap unit and continuing to iterate on engagement for the cohort of users who come to Snapchat for the stories page.
- The company is seeing encouraging testing results, especially with engagement metrics like increased content active days. They are focused on migrating story ad demand to the in-feed or Sponsored Snap unit and continuing to iterate on engagement for the cohort of users who come to Snapchat for the stories page.
- Analyst asked about the growth potential of Snapchat+ and how the company plans to add features to make it more meaningful.
- The company is excited about the progress of Snapchat+ and is focused on the core engagement loop with Snapping and how they can make it more differentiated with Snapchat+ features. They also see room for price increases and believe that folks are getting a lot of value from Snapchat+, which may be another avenue for growing ARPU over the longer term.
- The company is excited about the progress of Snapchat+ and is focused on the core engagement loop with Snapping and how they can make it more differentiated with Snapchat+ features. They also see room for price increases and believe that folks are getting a lot of value from Snapchat+, which may be another avenue for growing ARPU over the longer term.
- Analyst asked about the impact of DeepSeek and China-based AI innovations on the cost curve and how that impacts the Snap cost structure.
- The company is inspired by the innovation of DeepSeck and believes that it further validates their view that models will become commoditized and more efficient to run. They are in early experimentation phase with some of their open-source work and hope that it will have some impact on their cost structure over the longer term.
- The company is inspired by the innovation of DeepSeck and believes that it further validates their view that models will become commoditized and more efficient to run. They are in early experimentation phase with some of their open-source work and hope that it will have some impact on their cost structure over the longer term.
- Analyst asked about the impact of TikTok's resolution on Snap's priorities for the year and where they expect to be most nimble.
- Evan Thomas Spiegel, CEO of Snap, explained that the company is not drawing conclusions from TikTok's engagement when it went dark, and that the overall environment of uncertainty is benefiting their business. He stated that advertisers are focusing on contingency planning and diversifying their spend, while creators are thinking hard about how to build diversified engagement with their fan base across various platforms, including Snapchat. Snap's priority is to support advertisers and creators during this period of uncertainty, and they are focusing on improving the creation flywheel and reaching 1 billion public posts a month on Snapchat.
- Evan Thomas Spiegel, CEO of Snap, explained that the company is not drawing conclusions from TikTok's engagement when it went dark, and that the overall environment of uncertainty is benefiting their business. He stated that advertisers are focusing on contingency planning and diversifying their spend, while creators are thinking hard about how to build diversified engagement with their fan base across various platforms, including Snapchat. Snap's priority is to support advertisers and creators during this period of uncertainty, and they are focusing on improving the creation flywheel and reaching 1 billion public posts a month on Snapchat.
- Analyst asked about Snap's strategy to leverage the growth of Snap Promote and help SMB advertisers extend beyond Snap Promote, build full ad manager accounts, and start to get a little bit more sophisticated on the platform.
- Derek Andersen, CFO of Snap, explained that the company is pleased with the growth of the SMB segment and has made improvements to their go-to-market operations and simplified the ad buying experience. They have also benefited from their growing number of CAPI integration partners, including Snowflake, Datahash, Tealium, and LiveRamp. Snap Promote is a key driver of SMB advertiser growth, and the company has a robust roadmap of enhancements for their SMB clients, including a new smart budget optimization feature that will automatically adjust campaign budgets across ad sets to deliver the best results for the advertiser. Additionally, the company is investing in product and resources to scale the SMB segment.
- Derek Andersen, CFO of Snap, explained that the company is pleased with the growth of the SMB segment and has made improvements to their go-to-market operations and simplified the ad buying experience. They have also benefited from their growing number of CAPI integration partners, including Snowflake, Datahash, Tealium, and LiveRamp. Snap Promote is a key driver of SMB advertiser growth, and the company has a robust roadmap of enhancements for their SMB clients, including a new smart budget optimization feature that will automatically adjust campaign budgets across ad sets to deliver the best results for the advertiser. Additionally, the company is investing in product and resources to scale the SMB segment.
- Analyst asked about the demand environment for both brand and DR verticals and if there are any specific trends that have been muted.
- The demand environment for both brand and DR verticals is positive, with the best results being seen in verticals where Snap has built out great product market fit. The company has seen strong growth in retail, CPG, and health and wellness verticals with its new 7-0 pixel purchase optimization, and has expanded its product market fit by rolling out improvements to other optimizations. The company has also seen more than 70% YoY growth with app purchase optimizations in Q4, particularly in gaming, retail, e-com, and financial services verticals.
- The demand environment for both brand and DR verticals is positive, with the best results being seen in verticals where Snap has built out great product market fit. The company has seen strong growth in retail, CPG, and health and wellness verticals with its new 7-0 pixel purchase optimization, and has expanded its product market fit by rolling out improvements to other optimizations. The company has also seen more than 70% YoY growth with app purchase optimizations in Q4, particularly in gaming, retail, e-com, and financial services verticals.
- Analyst asked about compute costs and if the company has seen any improvements over time.
- Snap has seen improvements in compute costs over time due to its ability to innovate quickly and migrate between SKUs with cloud partners. The company's cloud-first model allows it to be more efficient and move quickly, and its own scale is also helping it to take advantage of advanced SKUs and bring its rates down. The company is constantly pushing for the best pricing in market and working with its teams to optimize its code structure and SKUs to have the most efficient possible infrastructure stack.
- Snap has seen improvements in compute costs over time due to its ability to innovate quickly and migrate between SKUs with cloud partners. The company's cloud-first model allows it to be more efficient and move quickly, and its own scale is also helping it to take advantage of advanced SKUs and bring its rates down. The company is constantly pushing for the best pricing in market and working with its teams to optimize its code structure and SKUs to have the most efficient possible infrastructure stack.
- Analyst asked about the upper funnel brand side weakness, specifically in the food and beverage category, and where the opportunities lie.
- Derek Andersen, Snap Inc's CFO, explained that the weakness in the upper funnel brand side continues to be concentrated in a small number of larger upper funnel-oriented advertisers. The company is focusing on accelerating product innovation, such as Sponsored Snaps, and offering enhanced client support and advanced measurement tools to larger brands and agencies. The company is also prioritizing diversifying the business and leaning into the places that are the focus of their roadmap, such as doubling down on the momentum of the direct response business and the SMB category.
- Derek Andersen, Snap Inc's CFO, explained that the weakness in the upper funnel brand side continues to be concentrated in a small number of larger upper funnel-oriented advertisers. The company is focusing on accelerating product innovation, such as Sponsored Snaps, and offering enhanced client support and advanced measurement tools to larger brands and agencies. The company is also prioritizing diversifying the business and leaning into the places that are the focus of their roadmap, such as doubling down on the momentum of the direct response business and the SMB category.
- Analyst asked about the go-to-market strategy for Sponsored Snaps and how fast it can be adopted in 2025.
- Evan Thomas Spiegel, Snap Inc's CEO, explained that the company is starting with their pixel purchase GBB, where they have a diversity of advertisers and a wide range of creatives, and holding a high bar for relevance as they bring the product to their auction. They will learn from this preliminary testing and expand to other GBBs over time.
- Evan Thomas Spiegel, Snap Inc's CEO, explained that the company is starting with their pixel purchase GBB, where they have a diversity of advertisers and a wide range of creatives, and holding a high bar for relevance as they bring the product to their auction. They will learn from this preliminary testing and expand to other GBBs over time.
- Analyst asked about the company's investments in machine learning for their advertising business and whether they are experimenting with larger models and fresher models to drive improved relevance.
- Derek Andersen, Snap Inc's CFO, explained that the company is experimenting with techniques like sequence models and other methods to drive improved relevance. They are also benefiting from the broader ML platform investments they have been making across the company, and they are experimenting with larger and fresher models to improve relevance, which benefits both their advertising and content businesses.
- Derek Andersen, Snap Inc's CFO, explained that the company is experimenting with techniques like sequence models and other methods to drive improved relevance. They are also benefiting from the broader ML platform investments they have been making across the company, and they are experimenting with larger and fresher models to improve relevance, which benefits both their advertising and content businesses.
