• by Colin Kirkland , October 31, 2024

While Snapchat's minimal user growth in the U.S. may raise concerns for investors, the social media company's third-quarter results show a steadily improving advertising business, with the rollout of additional ad formats and more small businesses flocking to the app.

In Q3 Snapchat added 11 million users, increasing its total number of daily active users to 443 million.

The global increase, however, does not reflect steady growth in the U.S. -- its most established market -- which has remained stagnant at 100 million users over the past two years.

Because the majority of Snap's revenue is still generated from its U.S. users, investors will eventually want to see an uptick in stateside users.

In addition, the platform’s user growth has been minimal in Europe as well.

But the company's recent investment in its ad business, which it began rebuilding in 2022, is paying off. Since introducing its Conversions API (CAPI), Snap has seen an increase in small and medium-sized business (SMB) advertisers, CAPI integration partners, and a revenue boost.

In Q3, Snap increased its overall revenue by 15% year-over-year -- bringing in $1.37 billion, with total active advertisers more than doubling year-over-year.

The company says its direct-response products are seeing a positive response from SMB advertisers.

For example, its Snap Promote offering has allowed SMBs and creators to promote their services, content, and products, while reaching new audiences and measuring ad performance directly on their mobile app.

The company has seen positive results with its new ad formats as well, including Sponsored Snaps, which Snap is currently testing with Disney. Along with Promoted Places, Sponsored Snaps are designed to leverage Snap's existing full-screen vertical video Snap Ad format so advertisers can automate placement across its ad service.

Snap says these new ad formats will launch in the fourth quarter this year.

In 2024, the company has seen the most dramatic CPM growth, with ad rates rising by 27.6% year-over-year, outpacing all other major platforms.

And to help boost engagement in the app while also further improving its ad business, Snap recently introduced the beta version of a new user interface (UI) called Simple Snapchat – a simplified version of its current app that seeks to simplify users's engagement options, moving stories posted by friends to the top of their inbox, with alerts that indicate new content.

The company says the new UI is “driving the greatest content engagement gains among more casual users,” including increased time spent with content, increased story views, and more replies to friends' stories, especially on Android devices.

Snap's subscription service, Snapchat+, has also grown, adding 1 million new subscribers in just two months, increasing the total number to 12 million users paying a monthly fee.