Snap Inc, the parent company of popular social media platform Snapchat, had a strong start to the year, which was confirmed when it announced the financial results for the first quarter of 2021. Not only did it exceed Wall Street’s estimates on earnings, user growth, and revenue, but its stock rose 3.5% in trading after the bell and 6% in after-hours trading.
In a statement, the Santa Monica-based camera and social media company said that sales had risen by 66% to $770 million in the period ended March 31, well ahead of the predicted $744 million.
Snap’s net loss narrowed 6% to $287 million, from a loss of $306 million a year ago.
Its app Snapchat, which has been of paramount importance to Snap’s growth, has garnered more popularity and more users. Additional factors are the overwhelming downloads of Snapchat during the pandemic and digital advertising campaigns by Snap.
Thus, Snapchat exceeded expectations as well, reporting 280 million daily active users in Q1 2021, more than the expected 275.4 million. Most of the user growth continued to come from outside North America, rising 57% from Q1 2020.
Snapchat has risen to new heights with its user base on Android exceeding those on iOS for the first time ever. While the platform has already been a hit in the US, it grew its presence overseas as well, thanks to new features like support for more languages and additional media content. In March, it had launched an original show called “Phone Swap India” on Snapchat’s “Discover” section, which provides original content and shows.
The company said it will pay out $1 million a day to creators of the top-performing posts as part of its program to promote popular videos. This strategy seems to be working for the company.
Moreover, it is expected that more investments in augmented reality, new advertiser tools, supporting high-quality creators, and recruiting users outside North America will lead to the growth of revenue of more than 50% for several years. Snap expects year-over-year revenue growth of 80% to 85% for the second quarter, said Snap CFO, Derek Andersen.
Augmented reality received a boost during the pandemic, and Snap hopes it will be the key to revenue growth in the future. The number of Snapchat users engaging daily with augmented reality lenses grew more than 40% year-over-year in the first quarter, Snap said. It has invested a lot in AR technology and had acquired shopping apparel-sizing firm Fit Analytics in March to expand e-commerce opportunities on Snapchat.
According to Snap CEO Evan Spiegel, there was a slow return to normalcy with the opening up of the economy and the growth of new social relationships. “We designed Snapchat to be a useful complement to real-life friendships, and are excited about these optimistic trends developing with our audience,” he said. Snap projected revenue in the current quarter of $820 million to $840 million compared with an estimate of $823.9 million.
“During the pandemic, advertisers accelerated their adoption of our augmented-reality products to enable product sampling and try-on when they were forced to find alternatives to traditional methods,” Chief Business Officer Jeremi Gorman said.