Snap finally has some good news to share

By Sahil Patel • February 6, 2018 •

Don’t call it a comeback just yet, but Snap’s broken its losing streak.

For the first time, Snap beat industry and Wall Street expectations for daily user growth and quarterly revenues. For the full year of 2017, Snap earned $824.9 million in revenue. The company continues to lose money, but things are certainly looking brighter for Snap today than yesterday. Here’s what you need to know from Snap’s earnings:

The key numbers:

187 million daily users (+8.9 million from previous quarter)
$285.6 million in quarterly revenue (+$77.6 million)
$1.53 average revenue per user (+.36 cents)
$350 million in losses in the fourth quarter
More than 90 percent of Snap Ads were bought programmatically last quarter
$100 million in revenue generated for Snapchat content partners in 2017

About that redesign…
During Snap’s third-quarter earnings call this past fall, Spiegel admitted that Snapchat was hard to use, one of the reasons the app hasn’t taken off the way investors and analysts hoped (the other, bigger reason: Facebook). Since announcing a redesign that would separate user posts and messages from media content, Snap has been quiet on when the new changes will launch.

Spiegel said the initial tests on the redesign have been promising. In one of the first test markets, daily users for Snapchat Discover channels grew by 40 percent following the redesign, he said. The full rollout is coming sometime in the first quarter.

Thinking emoji:
According to Spiegel: “Every week, on average, more than half of the entire 13-34-year-old population of the United States plays with augmented reality Lenses in Snapchat.”

More stories everywhere:
After noting how Snap is now making its stories available outside of Snapchat, Spiegel said: “We’ve also started bringing Snaps to bigger screens like stadium jumbotrons at this year’s Rose Bowl and Sugar Bowl. Removing friction from the way people use Snapchat and view Snaps will help us continue to grow our community over the coming year.”

Keep in mind:
The majority of Snap’s revenue is generated through brand advertising, which seasonally peaks in the fourth quarter, Snap CFO Drew Vollero said. Snap is also transitioning the creative tools business to the programmatic platform, which it believes will drive additional impressions at lower prices and result in more modest growth in the first half of 2018.

Goodbye, Spectacles:
In the first quarter of 2017, Snap made $8 million from Spectacles revenue, which it expects to be “substantially down year-over-year.”

What Wall Street was expecting:
Wall Street, already bearish on Snap, expected Snapchat to add six million new daily users last quarter and revenue of $253 million, according to Recode. Snap beat both expectations by substantial margins. Unsurprisingly, Snap shares skyrocketed by as much as 29 percent following the earnings release — which should give Snap a bit of a cover until it has to beat expectations once again in three months.

The Android factor:
This is the most Snapchat has grown daily users since Instagram copied the app with Instagram Stories. CEO Evan Spiegel attributed some of the user growth to improvements Snapchat made to its Android app; the retention rate of new Snapchat users on Android increased by 20 percent over the previous year, he said.

Everyone is as surprised as you: