Snap Sees First Quarterly Profit, Ad Biz Rebounds From iOS Challenges

In contrast to fellow platform giant Meta’s dismal fourth-quarter results, 11-year-old Snap reported its first quarterly net profit, and beat analysts’ expectations on revenue and user growth as well as earnings.

While Meta’s stock plunged after it warned of an expected $10-billion revenue hit in 2022 resulting from advertiser targeting challenges caused by Apple’s new iOS privacy policies, Snap’s direct-response advertising has been recovering more quickly than the company had anticipated, CFO Derek Andersen said in a statement prepared for Snap’s earnings call.

Andersen said the iOS changes are “likely to be experienced differently” by Snap than by other businesses because Snap anticipates privacy concerns as part of its product development process.

In addition, Snap said its sales team has been helping advertisers adjust to the transition.

Chief Business Officer Jeremi Gorman said advertisers normally focused on lower-funnel goals like in-app purchases have been most affected, and some have shifted to focusing on mid-funnel goals like installs and clicks, where visibility is less impacted by the iOS changes, reported CNBC.

Brand advertisers' budgets have been more affected by factors like supply-chain disruption and labor shortages, according to Andersen.

Snap’s revenue rose 42% year-over-year in Q4, to $1.3 billion. Analysts had forecast $1.2 billion.

Earnings were 22 cents per share or $22.5 million, versus a net loss of $113 million in Q4 2020. Analysts had estimated 10 cents per share.

Snapchat daily active users (DAUs) grew by 20% YoY, to 319 million, exceeding analysts’ 316.9 million expectation.

Average revenue per user was $4.06, versus analysts’ estimate of $3.79.

Snap’s guidance for the current first quarter put revenue at $1.03 billion to $1.08 billion, and DAUs at 328 million to 330 million — both exceeding analysts’ expectations.

Snap’s user growth strategy includes a push into Europe, Latin America and Asia.

Snap’s stock price leapt more than 50% in after-hours trading following its earnings report.

Pinterest also reported unexpectedly strong Q4 results on Thursday.

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