Q4 2024 Summary
Published Feb 7, 2025, 7:58 PM UTC- Rapid Growth of Snap+ Subscription Service: Snapchat+ subscribers reached 14 million in Q4 2024, doubling from 7 million earlier in the year. There's potential for further ARPU growth through the addition of new features and possible price increases, as users indicate high value from the service.
- Expansion of Advertiser Base, Particularly Among SMBs: The number of active advertisers more than doubled year-over-year in Q4, driven largely by small and medium-sized businesses. Snap is investing in tools like Snap Promote and new features such as smart budget optimization to further enhance advertiser performance.
- Promising Early Results from New Ad Formats: Early feedback on Sponsored Snaps is encouraging, with advertisers realizing incremental reach and providing positive responses. Snap plans to make this solution available to more partners over the course of the year, which could drive future revenue growth.
- Continued weakness in upper-funnel brand advertising revenue, particularly from a small number of large clients in North America, which could impact overall revenue growth. ( )
- Challenges with the rollout of Simple Snapchat, including engagement losses among users who prefer the traditional Stories layout, which might affect user retention and advertiser budget allocation. ( )
- Dependence on small and medium-sized businesses (SMBs) for ad revenue growth, raising concerns about the sustainability and scalability of this growth, as SMBs may have less consistent advertising budgets compared to larger advertisers. ( )
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q4 2024 | $1.51B to $1.56B | no current guidance | no current guidance |
Daily Active Users (DAU) | Q4 2024 | ~451M | no current guidance | no current guidance |
Infrastructure Costs per DAU | Q4 2024 | Near top end of $0.83 to $0.85 | no current guidance | no current guidance |
Other Cost of Revenue | Q4 2024 | 19% to 21% of revenue | no current guidance | no current guidance |
Adjusted Operating Expenses | Q4 2024 | Near low end of $2.425B to $2.525B | no current guidance | no current guidance |
SBC and Related Expenses | Q4 2024 | 4% to 5% below low end of $1.13B to $1.2B | no current guidance | no current guidance |
Adjusted EBITDA | Q4 2024 | $210M to $260M | no current guidance | no current guidance |
Revenue | Q1 2025 | no prior guidance | $1.325B to $1.36B | no prior guidance |
Daily Active Users (DAU) | Q1 2025 | no prior guidance | ~459M | no prior guidance |
Infrastructure Costs per DAU | Q1 2025 | no prior guidance | $0.82 to $0.87 (full-year range), Q1 at low end | no prior guidance |
Adjusted Cost of Revenue (% of Revenue) | Q1 2025 | no prior guidance | 19% to 20% (each quarter in 2025) | no prior guidance |
Adjusted Operating Expense Growth | Q1 2025 | no prior guidance | 11% to 12% year-over-year | no prior guidance |
Adjusted EBITDA | Q1 2025 | no prior guidance | $40M to $75M | no prior guidance |
Community Support Commitment | Q1 2025 | no prior guidance | ~$5M for wildfire support | no prior guidance |
Infrastructure Costs per DAU | FY 2025 | no prior guidance | $0.82 to $0.87 | no prior guidance |
Adjusted Operating Expenses | FY 2025 | no prior guidance | $2.7B to $2.75B | no prior guidance |
Stock-Based Compensation (SBC) | FY 2025 | no prior guidance | $1.15B to $1.2B | no prior guidance |
Headcount Growth | FY 2025 | no prior guidance | 8% to 10% | no prior guidance |
Legal Costs | FY 2025 | no prior guidance | Higher legal costs associated with litigation/compliance | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Snapchat+ Subscription Growth & ARPU Opportunities | Q1–Q3: Steadily rising subscription numbers from 9 million (Q1) to 12 million (Q3) with gradual emphasis on ARPU improvements and monetization initiatives ( , , ) | Q4: Accelerated growth to 14 million subscribers with doubled subscription revenue and emerging strategies around pricing and enhanced personalization features ( , ) | Accelerating growth and enhanced monetization focus |
SMB Advertiser Expansion & Revenue Reliance | Q1–Q3: Consistent emphasis on expanding the SMB advertiser base with active advertiser growth (up to 85% in Q1 and doubling in Q3) and diversification away from large brand reliance ( , , ) | Q4: SMBs are highlighted as the largest contributor to ad revenue growth, continuing robust expansion and new automation tools for campaign management ( , ) | Sustained and increasingly central to revenue diversification |
Direct Response Advertising Performance & Scalability | Q1–Q3: Repeated mentions of steady DR revenue growth (up to 17% in Q1 and 16% growth in Q3), improved optimization models (70-pixel purchase, 7/0 optimization), and scalability enhancements ( , , ) | Q4: Continued solid performance with 14% growth, significant lead generation improvements, lower cost per lead, and ongoing scalability innovations supported by automation ( , , ) | Consistent performance with ongoing scalability and efficiency gains |
Simple Snapchat Rollout: Engagement Promise vs. Monetization Risk | Q1–Q2: Little or no mention in Q1 and only peripheral discussion in Q2; Q3: Early testing showed enhanced engagement among casual users but identified monetization challenges, especially with story ad demand ( , ) | Q4: Emphasis on encouraging engagement metrics (increased content active days) while ongoing challenges persist in migrating story ad demand to new ad formats; careful iterative testing remains the focus ( ) | Recurring theme with promising engagement yet cautious monetization outlook |
New Ad Formats & Ad Placements (Sponsored Snaps, Promoted Places) | Q1–Q2: Limited or no mention in Q1 and Q2; Q3: Initial rollout and testing of Sponsored Snaps and Promoted Places with early positive feedback from advertisers ( , ) | Q4: Expansion of Sponsored Snaps with record impressions and a defined plan to test additional capabilities (e.g. Pixel Purchase Optimization); Promoted Places demonstrated tangible impact for clients like Taco Bell ( ) | Emerging topic gaining momentum and broader rollout intentions |
Persistent Weakness in Upper-Funnel Brand Advertising Revenue | Q2–Q3: Noted as a recurring challenge with weak demand among large enterprise clients and specific verticals (e.g. consumer discretionary, technology, and entertainment) ( , , ) | Q4: Continued reporting of persistent weakness concentrated among a small group of large advertisers, reinforcing the focus on diversified revenue strategies ( , ) | Ongoing negative sentiment with structural challenges remaining |
AI/ML Infrastructure Investments & Competitive Pressure | Q1–Q3: Regular discussions of stable and significant investments in AI/ML to fine-tune ad personalization and scalability; competitive pressures acknowledged mainly through cost impacts and global regulatory factors ( , , ) | Q4: Further emphasis on refining ML models (e.g. using sequence models and new AI image generation) along with clear references to competitive pressures spurring continued investment in innovation ( , ) | Continued heavy investment with a sharpened focus on outpacing competition |
User Engagement & Content Integration Challenges (Including Flat North American Growth) | Q1–Q3: Persistent issues noted with flat North American DAU and varied content engagement globally; ongoing efforts to integrate Spotlight and Stories with unification challenges ( , , ) | Q4: North American DAUs remain flat at 100 million with content integration challenges (e.g. issues in the Stories page experience) even as global time spent watching content grows; iterative testing of new experiences is underway ( , ) | Recurring challenges in key markets despite global engagement growth |
Emerging Augmented Reality & Spectacles Investment Initiatives | Q1: Emphasis on AR as a transformative pillar with high daily engagement and a vibrant creator ecosystem ( ) ; Q2–Q3: Gradual expansion with increased developer support and the debut of Spectacles in Q3 as part of an evolving AR strategy ( , ) | Q4: Marked by a robust AR ecosystem expansion (e.g. 375K+ creators, 4 million Lenses) and the launch of fifth-generation Spectacles with Snap OS, underscoring significant hardware and software integration efforts ( , ) | Steady and increasingly ambitious, positioning AR as a core long-term growth engine |
Revenue Growth Guidance & Deceleration Concerns | Q1: Guidance noted deceleration due to tougher comparisons and seasonality effects leading to a 3–6 percentage point drop from Q1 to Q2 growth rates ( , ) ; Q2–Q3: Mixed signals with moderate guidance focusing on DR and subscription drivers despite headwinds in brand advertising ( , ) | Q4: Although Q1 2025 guidance remains healthy (with expectations driven by DR and SMB momentum), the commentary reflects continued caution regarding deceleration in upper-funnel revenue ( , ) | Mixed sentiment with steady long-term expectations amid short-term deceleration concerns |
Advertiser Tools & Innovations (Snap Promote, Smart Budget Optimization) | Q1–Q3: Consistently noted as key for enabling SMB advertisers with Snap Promote and early tests of campaign optimizations (including dynamic product selection and cold start performance improvements); various tools rolled out and refined over these periods ( , , ) | Q4: Continued emphasis on advertiser empowerment through Snap Promote’s success (with SMB active advertisers more than doubling) and the upcoming test of Smart Budget Optimization in Q1 2025 to further simplify ad management ( , ) | Steady innovation with growing impact on advertiser performance and ease-of-use |
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Snapchat+ Growth Potential
Q: How will Snap+ drive future growth?
A: Evan Spiegel is excited about Snapchat+'s progress, noting it now accounts for almost 10% of total revenues and is the fastest growth driver. Users appreciate personalization features, and there's room for price increases, as the annual plan in the U.S. is about $2.50 a month. Future focus is on enhancing core engagement with differentiated Snap+ features. -
SMB Advertiser Expansion
Q: How are you leveraging SMB advertiser growth?
A: Derek Andersen reports the SMB segment is thriving, with active advertisers more than doubling year-over-year in Q4. They've simplified ad buying with automation, enhanced DR ad products, and expanded CAPI partnerships with firms like Snowflake and LiveRamp. A new smart budget optimization feature is being tested in Q1 to improve campaign results for advertisers. -
Upper Funnel Ad Weakness
Q: How are you addressing upper funnel ad weakness?
A: Weakness remains among a few large advertisers. Derek emphasizes accelerating product innovation, with early Sponsored Snaps showing promising incremental reach. They're enhancing support for large brands through better client services, platform integrations, and tools like the VideoAmp partnership for reach and measurement. -
Sponsored Snaps Strategy
Q: What's the plan for Sponsored Snaps in 2025?
A: Evan Spiegel is pleased with Sponsored Snaps' performance, highlighting thoughtful advertiser creativity leading to a native user experience. They plan a careful rollout, starting with the Pixel Purchase GBB, ensuring high relevance as they introduce the product to auction, and will expand to other GBBs over time. -
Compute Cost Efficiencies
Q: How will you realize compute cost efficiencies?
A: Derek Andersen explains they're innovating quickly while optimizing code for efficient infrastructure use. The cloud-first model avoids fixed infrastructure costs. Their scale allows for better pricing, and as advanced SKUs commoditize, they reduce rates. They're committed to optimizing code and infrastructure for maximum efficiency. -
Impact of TikTok Outage
Q: How did TikTok's outage affect engagement?
A: Evan Spiegel notes that while there was some engagement lift during TikTok's brief absence, it was an imperfect experiment, and they're not drawing conclusions. The uncertainty benefits Snap as advertisers diversify spend and creators seek broader engagement. They've seen a 40% increase in creators posting and reached 1 billion public posts monthly in Q4. -
Q1 Guidance and Simple Snapchat
Q: Is Simple Snapchat included in Q1 guidance?
A: Derek Andersen states that nothing material from Simple Snapchat is included in Q1 revenue or user growth guidance. They're still testing and optimizing the experience. Current growth is driven by momentum in the DR sector, SMB strength, and global community expansion. -
Demand Trends in Verticals
Q: How is demand across brand and DR verticals?
A: Derek observes strong results where there's great product-market fit. The 7-0 Pixel Purchase Optimization has boosted DR business, especially in retail, CPG, and health and wellness. Mid-2024 enhancements led to over 70% year-over-year growth in app purchase optimizations in Q4, benefiting gaming, retail e-commerce, and financial services sectors.