Q3 2023 Summary
Published Jan 27, 2025, 11:31 PM UTC- Strong growth in Snapchat+ subscriptions, reaching over 5 million subscribers, resulting in revenue growing more than 250% year-over-year, indicating successful diversification of revenue streams beyond advertising.
- Significant improvements in the advertising platform, especially with the 7-0 pixel purchase optimization, leading to better ROI for advertisers and driving lower funnel revenue growth year-over-year and quarter-over-quarter.
- Healthy engagement trends, with global acceleration in time spent growth year-over-year and U.S. content time spent growing quarter-over-quarter, demonstrating strong user engagement on the platform.
- Weakness in North American advertising revenue growth due to complexities with larger advertisers, creating uncertainty about when growth will converge with international business. Evan Spiegel acknowledged that while progress is being made, there is "a long way from where we'd like it to be" in North America, and larger accounts are "more complex to work with."
- Revenue guidance for Q4 implies deceleration despite easier comparisons, with potential negative impact from paused brand campaigns due to the war in the Middle East. Derek Andersen noted that "we have had a number of primarily brand-oriented campaigns pause spending" following the onset of the war, and that "it would be imprudent to provide a formal guide in that kind of environment."
- Slowing user growth in mature markets limits future DAU expansion, with Q4 guidance indicating modest growth and reliance on Rest of World regions where growth is decelerating due to tough comparisons. Derek Andersen stated that "we're reaching really high percentages of 13- to 34-year-olds in over 25 countries... so we're already at a very, very high penetration there," and that "growth in the DAU number in total, recently has been coming from the rest of world region... we had a very good quarter in the prior year as a comp there."
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Q4 Revenue Guidance
Q: Can you elaborate on the 4Q revenue guidance amid Middle East war?
A: Derek explained that while they were pleased with Q3 revenue progress, uncertainties are impacting Q4, especially due to the war in the Middle East. They saw some brand-oriented campaigns pause spending after the onset of the war, though many have resumed. Given the unpredictability of war, they refrained from a formal guidance but shared an internal forecast that assumes an acceleration at the top end. They remain fundamentally pleased with the progress in their direct response ad platform and brand advertising uptake. -
North America Ad Sales
Q: How confident are you about North America ad sales growth?
A: Evan acknowledged progress in North America but noted it's still far from where they'd like it to be. The region has more complex, larger customers, requiring detailed work to drive customer success. They are fixing issues daily to help advertisers meet or exceed their KPIs, which should translate into improved spend. Evan expressed excitement about Patrick's leadership of the team, bringing valuable experience. -
2024 Revenue Growth Goal
Q: How ambitious is the 20% revenue growth goal for 2024?
A: Evan mentioned that the internal memo aiming for 20% revenue growth was designed to motivate the team around what's possible. Achieving this growth hinges on making more progress in customer success, especially in the lower funnel. They are excited about the progress and hope to keep improving by focusing on advertiser needs. -
My AI Usage and Monetization
Q: Can you update us on My AI usage and commercial intent?
A: Evan stated that while My AI isn't a daily use case yet, it's hoped to be a weekly one. The focus is on improving response quality to drive engagement and retention. They are integrating commercial intent into their models to help users see more relevant content and advertising, making progress in that area. -
Engagement Trends and DAU Guidance
Q: How is platform engagement, and what's the DAU outlook for Q4?
A: Evan reported healthy engagement trends and opportunities to drive more daily usage with monthly active users, especially in developed regions like North America. There's also headroom for new users in the rest of the world. They saw year-over-year acceleration in global time spent growth and positive trends in the U.S. Derek added that they expect DAU in Q4 to be 410 million to 412 million, reflecting significant year-over-year growth of 35 to 37 million DAUs. Growth is mainly driven by the rest of world region. -
Subscription Revenue Growth
Q: Can you share subscription revenue figures and expectations?
A: Derek mentioned strong momentum with Snapchat+, reaching over 5 million subscribers. Since the Investor Day, subscription revenue has grown about 60%, becoming a more meaningful contributor with over 250% growth in the most recent quarter. They expect continued momentum in subscriptions and advertising into Q4. -
Performance of Ads in My AI
Q: How are ads within My AI performing, and are you considering more partnerships?
A: Evan noted that it's still early with the Microsoft Bing partnership. Click-through rates are healthy when ads are relevant, so improving relevance is a key focus. They're integrating signals from My AI to inform interest categories. While they consider this a longer-term investment, immediate work on the ad platform is yielding meaningful results, and there are more important priorities right now than expanding partnerships. -
ARPU Increase in Europe and North America
Q: Why did European and North American ARPU jump significantly?
A: Derek attributed the ARPU growth to fundamental improvements in the ad platform, products, and go-to-market efforts. In Europe, the enhancements in the direct response ad platform and new brand products like First Story led to better ROI for advertisers. North America's sequential ARPU growth reflects similar improvements showing up later, with North America being the fastest-growing region quarter-over-quarter at 14%. The progress demonstrates the fundamental work is positively impacting ARPU.