‘It’s still early days’: Snap says ad products will help deliver better results in time

Snap's Q2 earnings were underwhelming, but the company is confident in its ad products.

Despite underwhelming Q2 2017 results, Snap remains optimistic its ad products – particularly its self-serve platform, which accounted for 60% of ad impression buys – will not only increase spend, but attract new advertisers and drive growth.

The numbers

For the three months ending June 30, 2017, Snap reported revenue of $182m, up from $71.8m in the year-ago period, but still falling short of Wall Street forecasts of $186.2m.

In addition, Snap said daily active users (DAUs) increased by 7.3 million in Q2 2017, but that’s down from the 8 million it added in the first quarter – and also lower than analyst expectations, which estimated Snap would close out the second quarter with 174.6 million DAUs. Snap now has 173 million DAUs, which is up 21% year-over-year – but only an increase of 4% for the quarter.

Stocks were trading at $11.55 after closing, dropping 16%. That’s down from an IPO price of $17.

‘Quite an accomplishment for a short time’

Nevertheless, on an earnings call Thursday (August 10), chief executive Evan Spiegel remained confident, saying Snap made “great progress this quarter” and he would not sell any shares this year because he “[believes] deeply in long-term success of Snap.”

He said this “great progress” includes more frequent visits by users who spend more time and create more snaps than ever before – to the tune of 20 snaps per day from each DAU.

In addition, chief strategy officer Imran Khan pointed to over 69 million DAUs in the US and Canada, which, he said, are the two countries that represent half of all global ad spend.

Khan, in particular, stressed the promise of Snap’s ad products, most notably its self-serve platform and said Snap will remain focused on enhancing its advertising offers, developing efficient tools and proving the effectiveness of its advertising.

Both Khan and Spiegel repeatedly said it’s still “early days” and Khan noted multiple times that 60% of all ad impression buying happened through its self-serve platform, which he called “quite an accomplishment for a short time” given the platform launched in Q2.

Khan also said the self-serve product will help tap additional spend from existing advertisers and onboard new advertisers, which will drive “solid growth.”

Snap also plans to focus on offline sales measurement thanks in part to its acquisition of Placed and Spiegel said Maps will help drive discovery.

However, when asked how he feels about Snap’s product pipeline, Spiegel responded demurely with, “We’re very excited. It’s what we love to do. We’re having a great time.”

Snap v. Facebook

And while not naming players like Facebook and Instagram specifically, Spiegel said Snap’s focus on innovation and building new products that enable Snapchatters to do more with what they create is what allows it to compete against “giant companies.”

Earlier this month, Snap launched a measurement program with Neustar Marketshare, Analytics Partners, MMA and Nielsen to measure return on ad spend and sales lift and to combat complaints about poor ad measurement and tracking. The move was also intended to prove to investors Snap is a worthy adversary to these aforementioned “giant companies,” which, coincidentally, have been nipping at its heels with similar products.

When Snap went public in March it promised growth, but it has struggled to deliver so far.

First quarter revenue was $149.6m, which was below forecasts of $158m to $173m. Daily active users, too, were below expectations at 166 million in Snap’s first earnings call as a publicly traded company in May.

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Lisa Lacy

Lisa Lacy is a senior reporter for The Drum, covering digital and search marketing. Based in New York, she writes about how brands use technology to connect with consumers, particularly as innovations like voice search, digital assistants and the Internet of Things change consumers’ lives forever – not to mention the data these platforms increasingly collect and the security and privacy issues therein. She is a graduate of Columbia's School of Journalism. Her bucket list includes riding in the Oscar Mayer Wienermobile.

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