Snapchat’s turnaround in 2020 was no fluke. The company recently reported a monster quarter, reaching its highest year-over-year revenue and daily active user (DAU) growth rate in four years. It’s time for businesses to seriously consider Snapchat as part of their game plan for reaching Gen Z and Millennial audiences. Many are already, which is why Snapchat’s ad revenue keeps rising. Let’s take a closer look.
Snapchat Reports Stunning Quarterly Growth
Snapchat’s growth for the second quarter of 2021 was nothing less than stunning. Its revenues increased to $982 million, a 116 percent increase compared to the prior year. That growth was accompanied by an increase in DAUs, an important metric because more people using Snapchat means a growing audience for advertisers. DAUs were 293 million for Q2 2021, an increase of 55 million, or 23 percent year over year. DAUs increased sequentially and year over year on both iOS (Apple) and Android (Google) platforms.
Evan Spiegel, CEO of Snapchat’s owner, Snap, said in a statement, “Our second quarter results reflect the broad-based strength of our business, as we grew both revenue and daily active users at the highest rates we have achieved in the past four years. We are pleased by the progress our team is making with the development of our augmented reality platform, and we are energized by the many opportunities to grow our community and business around the world.”
Why Is Snapchat Is Growing
Spiegel noted that Snapchat is succeeding for three reasons: a growth in augmented reality (AR) features, new content, and new advertising features. Examples of all three:
New AR Features
- Connected Lenses, enabling Snapchatters in different locations to interact with each other through AR.
- Several try-on capabilities with Lens Studio 4.0, including multi-person 3D body mesh, advanced cloth simulation, and a new visual effects editor for more realistic Lenses.
These are significant because AR has always been an important competitive differentiator for Snapchat, as we noted on our blog recently. Medium recently commented, “One of the reasons that Snapchat is able to carve out its own niche in the increasingly combative social media arena is its singular focus on AR-powered visual communication, which differentiates Snapchat from its competitors.”
Source: Snap investor presentation
Indeed, businesses have capitalized on Snapchat’s embrace of AR and are doing so as they gear up for the 2021 holiday shopping season. In a recent webinar, Snapchat shared example of Ugg boots, which is part of Deckers Brands. A spokesperson from Deckers Brands said that Deckers used AR in Snapchat for their holiday campaigns in 2020 to allow customers to use Ugg filters to “try on” their boots. This year, Deckers will probably do something similar with apparel, since Ugg is expanding its products into all kinds of apparel. (Deckers is no stranger to Snapchat. In this 2020 investor call, Snapchat describes how Ugg has successfully applied Snapchat’s dynamic ads feature.)
- Eight new and renewed Snap Originals, including Swae Meets World, a documentary featuring American musician Swae Lee as he prepares to launch a solo album.
- A record 177 new international Discover Channels, including 36 in the UK and 24 in India, one of which is a partnership with Sony Pictures Network to launch five Shows.
These developments arrived on top of Spotlight, which is Snapchat’s feature for monetizing individual creator content, launched in November 2020. New content features geared toward businesses and individual creators alike are important because they provide advertising sponsorship opportunities for brands and the growing creator economy.
Source: Snap investor presentation
New Advertising Features
- Public Profiles for businesses, which allows any business to create a profile on Snapchat showcasing their Lenses, Highlights, Stories, and shoppable products.
- An integration with Salesforce, allowing brands to leverage their first-party data to reach Snapchatters with relevant ads.
- The Creator Marketplace (within self-serve Ads Manager), connecting advertisers with certified Lens Creators and facilitating the AR development process.
The Salesforce integration is especially noteworthy. With Google phasing out support for third-party cookies on the world’s most popular browser, Chrome, businesses are under more pressure to figure out how to maximize the value of their first-party data. Snapchat is sensing and responding to this need.
The news media reacted positively to Snapchat’s strong quarter. The “Yes, but can they do it again?” tone that characterized coverage of Snapchat’s positive results in 2020 subsided. For example, Meghan Bobrowsky of The Wall Street Journal portrayed Snapchat as a feisty and innovative company successfully fighting back at is copycat rivals.
She wrote, “The company, best known for disappearing photos and messages on its Snapchat app that is popular with teens and young adults, has impressed investors with its growth during the pandemic, outpacing much larger rivals. It has introduced new features to appeal to businesses beyond traditional social-media advertising, including a push into augmented reality.”
What Advertisers Should Do
We believe advertisers should take a closer look at Snapchat. Start with the creation of a Snapchat Public Profile (similar to a Facebook page) to understand how to interact with Snapchat’s audience. And understand how the Snapchat audience interacts with content. According to Snapchat, its user base, which skews toward Gen Z and younger Millennial generations, has these characteristics in common:
- 150 percent more likely than non-Snapchatters to prefer to communicate with pictures over words.
- Snapchatters are three times more likely than non-Snapchatters to say they are using AR more than they did last year to try on products.
- The Snapchat Generation is 1.4 times more likely than non-Snapchatters to gravitate to immersive video and mobile games, including AR experiences.
If your brand already rocks Instagram with visual content, chances are you are well positioned to succeed on Snapchat!
Contact True Interactive
For More Insight
“How Snapchat Keeps Innovating with Augmented Reality,” Bella Schneider.
“Snapchat Spotlight: Advertiser Q&A,” Max Petrungaro.
“Why Snapchat Keeps Growing,” Bella Schneider.