Despite beating analysts’ second-quarter earnings expectations, Snap said daily active users actually declined during the period. From the first quarter of the year to the second, the company’s DAUs slipped by about 2% from 191 million to 188 million.
On the bright side, Snap reported quarterly revenue of $262 million, which was up 44% year-over-year and a net loss in earnings of $353 million, down 20% year-over-year.
Also working in the company’s favor, Snap said average revenue per user increased 34%, year-over-year -- from $1.05 in second-quarter 2017 to $1.40 in second-quarter 2018.
Analysts attributed Snap’s strong financial performance to its continued shift to programmatic advertising.
“We’re seeing programmatic start to pay off,” said Melissa Parrish, an analyst at Forrester Research. “Previous quarters saw some investors become concerned about prices coming down, but we’re now seeing what programmatic does: dramatically increase the number of advertisers so the revenue pool increases even if CPMs decrease.”
“The move to programmatic was always going to take a while to show positive revenue results, but we're at the beginning of that,” Parrish added.
Among other second-quarter achievements, Snap said 11 original content “shows” reached a monthly audience of over 10 million users, up from 7 million during the first quarter.
Snap also debuted Group Video Chat, which lets users video chat with up to 16 friends at one time. It also launched Snappables -- new Lenses for sharing augmented reality experiences -- and a new version of Spectacles.
Catering to the developer community, Snap also rolled out an app building platform named Snap Kit.
Looking ahead to the third quarter, Snap said it expects revenue between $265 million and $290 million, which would represent annual growth of between 27% and 39%.
It expects net losses to decrease between $160 million and $185 million in the third quarter. Despite the DAU disappointment, Snap watchers say the company has plenty of opportunities for growth.
Among other smart moves, “Snap’s partnership with Nielsen to offer deeper audience targeting capabilities may make the platform more appealing to CPG brands moving forward,” suggested Socialbakers CEO Yuval Ben-Itzhak. “If they can get the daily user numbers gaining again, the future may be looking brighter for Snap."