Snap, Inc. has reported substantial growth in the fourth quarter of 2017, smoothing investor relations after a rough first IPO year. The Snapchat parent company credits its success to improvements made to the Android app and “removing friction” from its advertising business.
In the fourth quarter of 2017, Snapchat saw the addition of 8.9 million daily active users (DAU), the highest number of quarterly net adds since the third quarter of 2016. Annual revenues grew 104 percent from the prior year, but came at a lower cost than the previous quarter, according to CEO Evan Spiegel.
“In 2017, we focused on removing friction from our products, our advertising business, and our team,” said Spiegel.
Snap Ads were migrated to an automated auction last year, resulting in over 90 percent being purchased programmatically during the fourth quarter, and total advertising revenue grew 38 percent. Spiegel added that Snapchat we increased advertising impressions by over four times year over year while continuing to grow per-user engagement.
Total advertising revenue for the quarter was $281 million, an increase of 74 percent year over year and 38 percent quarter over quarter.
Throughout the year, Snapchat made a number of changes to its app that prioritize friends over publishers—a move that may have influenced the recent Facebook News Feed update. According to Spiegel, the redesign has increased the retention rate of new Android users by 20 percent over 2016 and increased the number of net additional users more than any other quarter in the company’s history.
Commonly associated with teenagers and young adults, Snapchat’s redesign is having a positive impact on older users, as well.
“Compared to the old design, core metrics around content consumption and time spent in the redesigned application are disproportionately higher for users over the age of 35, which bodes well for increasing engagement among older users as we continue to grow our business,” Spiegel said.
This may prove to be a double-edged sword as more users drive growth, but younger users may become disenfranchised with Snapchat as soon as Mom signs up. A 2016 study by Defy Media found that 30 percent of users between the ages of 13-24 prefer Snapchat because their parents don’t use it.
Emarketer predicts that the number of generation Y users who access Snapchat every month will account for 56 percent of all US Snapchat users by 2020.
Investors were clearly happy with the results as Snap, Inc. stock rose 22 percent hours after the earnings call.
