Advertisers Triple their Upfront Commitment with Snap
Snapchat | April 26, 2021
Advertisers are increasing their spending on Snap as the world reopens.
Snap reported US$770 million in Q1 revenue on Thursday, a 66% growth year on year, as the number of advertisers it deals with nearly doubled.
Snap's ad business is expanding in all ways. Direct response ads currently account for more than half of the platform's revenue. Snap, on the other hand, tripled the number of upfront commitments it got from brands this year compared to 2020.
Over the same time frame, Snaps' user base rose by 22% to 280 million, while average revenue per user increased by 36% to $2.74 year over year.
Since the majority of Snap's users use Android smartphones, insulating it somewhat from upcoming tracking changes on Apple’s iOS 14.5.
Advertisers are increasing their spending on Snap as the world recovers from the pandemic and the ad economy heats up again.
Snap, which has been beefing up its direct response and e-commerce capability, is seeing travel and leisure advertisers, which have been hard hit by the pandemic, rebound “with a fury,” according to chief business officer Jeremi Gorman, highlighting the company's March acquisition of AR e-commerce platform Fit Analytics.
Ecommerce, CPG, technology, streaming, online education, and telco brands are all showing interest in the platform.
“We are seeing the return of some previously powerful categories, such as theatrical and movies,”she said.
Snap is prioritizing augmented reality, partnering with brands such as Sweat, Gucci, The North Face, and American Eagle on branded lenses this quarter. In Q1, almost half (40%) of Snap users used filters regularly, with more than half of them being branded.
“Augmented reality is one of our most exciting challenges as we look forward, and we are investing heavily in both core technology and community-facing AR apps on our service,” Evan Spiegel, co-founder and CEO of Snap, said during the earnings call.
Snap also introduced a TikTok-rival update, Spotlight, in Q4, which was used by more than 125 million people in Q1. India, Mexico, and Brazil are now among the countries that have access to this feature.
The IDFA to drop
Snap is still unsure how Apple's App Tracking Transparency changes, which are set to take place on Monday, would affect its business. However, the company expects to grow by 80% in the second quarter.
“It is not yet clear what the longer-term effect of the iOS platform updates might be on the topline momentum of the business,” said chief financial officer Derek Anderson.
According to Spiegel, Apple's decision to delay the updates until April has given Snap time to implement SKAdNetwork, Apple's solution for measuring user activity across its applications, which it is testing with partners along with other "privacy-centric" solutions.