At its first investor day conference, Snap outlined a bullish future for the Snapchat app — with senior execs saying they expect the company to generate 50% revenue growth for at least the next several years.
On the upbeat forecast, Snap shares popped more than 7% on Tuesday, with the stock hitting all-time highs, after dropping nearly 10% earlier in the day.
Today, Snap has less than 2% share of the U.S. digital ad market, while Snapchat reaches nearly half of U.S. smartphone users. The implication? That the company has plenty of runway to grow.
CFO Derek Andersen said at the event that based on the monetization platform Snap has built and its product road map, “we can responsibly grow our topline revenue at 50% or better year over year for at least the next several years.”
For the full year 2020, Snap revenue grew 46% year over year, to $2.5 billion. Snap’s fourth-quarter 2020 results topped Wall Street earnings expectations, as Snapchat gained 16 million daily users to hit an average of 265 million in quarter.
The Snapchat app has five tabs — Camera, Map, Chat, Stories and Spotlight — and each of those areas are long-term opportunities represent multibillion-dollar revenue opportunities, according to Andersen.
CEO Evan Spiegel summed up Snap’s approach at the start of the presentation: “Our strategy is to take product innovations like augmented reality lenses and evolve them into platforms by building tools for creators and developers and providing distribution for their creations to reach the Snapchat community,”
Spiegel said that Snapchat Stories, despite “substantial competitive pressure” — referring to rivals like Instagram, Facebook and Twitter copying the format — has become its largest revenue stream.
“We generate the vast majority of our revenue from Snap Ads inserted in between those Stories,” he said. “And these ads allow our community to take direct actions by swiping or tapping, and they’ve become an important tool for direct response and brand advertisers.”
Snap says its original short-form Shows are a critical piece of its growth in engagement. In 2020, total time spent watching Shows was up nearly 70% year-over-year, according to Andersen. “As we continue to deepen our engagement, our available inventory of premium ad units has grown,” he said.
Meanwhile, even as others have copied Snapchat features, Snap itself has borrowed from TikTok with Spotlight, the user-generated content section in Snapchat. Launched in late November, Snap had over 100 million monthly active users in January 2021. “[W]e are excited about the potential for Spotlight to further expand the supply of our highest yielding and most in demand advertising products in the future,” Andersen said at the event.
According to the company, Snapchat reached over 70% of those 13-24 in countries comprising over half the world’s digital ad spend. Approximately 80% of the Snapchat user base is over the age of 18.
“Longer term, we believe Snapchatters will engage naturally with businesses of all sizes across our service, whether through a brand’s profile, finding store hours on the Map, or interacting with products using an AR Lens,” said Jeremi Gorman, Snap’s chief business officer.
To date, Snap has localized content in nine different languages from nearly 500 partners in 17 countries around the world.