• by Colin Kirkland , 2 hours ago

In its fourth-quarter performance report, Snapchat experienced the loss of several million daily active users in key markets compared to the previous quarter, while boosting its ad revenue by 5% year-over-year.

Having faced a nationwide ban in Russia in December, as well as locking hundreds of thousands of teen accounts in Australia last month, Snapchat’s reported loss of 3 million DAUs over the past quarter is not unexpected.

The social-media platform, which now has a total of 474 million global DAUs and 946 million MAUs, added over 150 million MAUs over the past three years. 

Snap explains in its letter to investors that the decline in global DAUs reflects its decision to “substantially reduce community growth marketing investments” as the company strives for “more profitable growth.”

Notably, Snap continued to lose active users this past quarter in the U.S. and Europe, which represent key revenue markets for the company.

To make up for its decline in user growth, Snapchat remains focused on developing additional revenue streams to remain profitable.

“In the year ahead, we will focus on growing existing subscription offers,” the company’s investor letter reads, citing a 71% year-over-year growth in its subscriber base. 

“In the year ahead, growth in subscribers will be a critical input metric to track our progress,” the letter continues. “And we will ultimately grade our performance based on growth of the annualized run rate for Other Revenue,” which increased 62% year-over-year in Q4 to $232 million.

Overall, Snap brought in $1.72 billion for the quarter, marking a 10% increase year-over-year. 

With declining DAU growth, advertising will play an even bigger role in delivering revenue for Snap.

In Q4, total active advertisers grew 28% on the platform, while ad revenue reached $1.48 billion. 

In Snap’s report, the company primarily likens this 5% year-over-year growth to direct-response ad revenue due to small business partners via a recent integration with Wix, and a demand for in-app purchase optimizations, up 89% year-over-year.

Furthermore, revenue from dynamic product ads increased 19% year-over-year, while Sponsored Snaps click-through rates grew 7%, click-through purchases grew 17% between Q3 and Q4, and the AI-powered Smart Campaign Solution suite influenced an 8% lift in conversions. 

Moving forward, Snap is focused on growing its ad business by deepening connections between brands and creators via enhanced AI tooling, as well as scaling its go-to-market operations related to the success of SMBs. 

Snap’s overall business is also reliant on the success of its upcoming launch of Specs AR wearables, which the company is strategically planning to release ahead of competitor products from Apple and Meta.

To help support Specs adoption, Snap has developed a new operating system, is testing a backend platform called Snap Cloud, and is making its Lens Studio compatible with the augmented reality product.