By Sheila Dang
(Reuters) – Snap Inc beat Wall Street estimates for quarterly earnings and user growth for its Snapchat app on Tuesday as more people seek entertainment while at home during the global pandemic of coronavirus.
Snapchat, known for its missing messages, said it had seen an increase in usage in the last week of March compared to the end of January as more people used the app to communicate with their friends and family. Usage has also increased for original Snapchat content and in-app games.
Snap shares jumped 20% to $ 14.93 in trading after the bell.
Daily active users (DAU) on Snapchat increased 20% to 229 million in the first quarter ended March 31 compared to the previous year. The figure was 218 million in the fourth quarter.
DAU, a measure widely watched by investors and advertisers, exceeded analysts’ average estimate of 224.68 million, according to Refinitiv data.
Revenues, which Snap primarily earns from selling advertising on the app, increased 44% from the previous year to $ 462.47 million. The company said higher revenues in the first two months of the quarter offset the lower growth in March when advertisers began to tighten marketing budgets as non-essential stores closed in the middle of the pandemic.
Analysts had expected $ 428.80 million in the first quarter.
So-called “direct response” advertisers, or those looking to increase sales through their ads rather than name recognition, were a positive point, said Evan Spiegel, chief executive officer of Snap, during a conference call with analysts. Direct response advertising now accounts for more than half of Snap’s total revenue.
Small and medium-sized businesses were hit hard during the pandemic, but represent a smaller part of Snap’s direct advertising activities, which helped protect revenues, said Jeremi Gorman, Snap’s business manager, during the call for results.
The company said it would shift resources from its sales team to serve advertisers in areas such as games, home entertainment and consumer packaged goods, which are expected to see increased demand from people stranded at home. .
For example, Snap could help movie studios switch to digital or streaming versions, said Spiegel.
Snap said it would not provide its usual directions for the next quarter, given the uncertainty caused by the coronavirus.
“These high growth rates at the start of the quarter reflect our investments in our audience, our advertising products and our optimization, and give us confidence in our ability to increase our revenues in the long term,” said Spiegel.
Research firm eMarketer lowered growth estimates for the global advertising industry this year to 7% from 7.4% – a difference of $ 20 billion – due to the coronavirus, in a report last month. .
Average revenue per user in the first quarter was $ 2.02, up from $ 1.68 the previous year.
Snap’s net loss decreased slightly to $ 305.9 million, or 21 cents per share, from $ 310.4 million, or 23 cents per share, a year earlier.
(Reporting by Sheila Dang; Editing by Lisa Shumaker)