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Snap fights in an area where it must succeed

Snap Inc.'s user number was not as bad as expected in Tuesday's earnings report, but Snapchat's parent company suddenly hit an area where it must succeed. Snapchat SNAP, + 3.99% reported less than expected loss in the first quarter and 4 million new users from the year's end, 2 million more than Wall Street had expected. However, Snap also reported that a closely watched number – average revenue per user, or ARPU – fell sequentially in all geographic regions, to $ 1 .68 per user, from $ 2.01 in the fourth quarter. Snap already has the lowest ARPU among publicly held social media, which CNBC pointed out last month. In the fourth quarter, Snap compared $ 2.01 in ARPU versus $ 7.37 for Facebook Inc. FB, + 1.29% and $ 9.48 for Twitter Inc. TWTR, + 15.64% . As Twitter has proven in recent years, a social media service can survive without consistently adding lots of users, as long as it grows the amount of money it does for each user. Before Tuesday, bulls can at least point to enormous growth in Snaps ARPU, especially in Europe and the rest of the world, where Snap desperately needs an increase. But that changed during the first quarter, when ARPU growth hit record low outside North America. In Europe, Snap reported 77 percent per user, an increase of 47 percent over last year, and it was 97 cents in the rest of the world, an increase of 68 percent. This is the…

Snap Inc.’s user number was not as bad as expected in Tuesday’s earnings report, but Snapchat’s parent company suddenly hit an area where it must succeed.

Snapchat

SNAP, + 3.99%

reported less than expected loss in the first quarter and 4 million new users from the year’s end, 2 million more than Wall Street had expected. However, Snap also reported that a closely watched number – average revenue per user, or ARPU – fell sequentially in all geographic regions, to $ 1

.68 per user, from $ 2.01 in the fourth quarter. Snap already has the lowest ARPU among publicly held social media, which CNBC pointed out last month. In the fourth quarter, Snap compared $ 2.01 in ARPU versus $ 7.37 for Facebook Inc.

FB, + 1.29%

and $ 9.48 for Twitter Inc.

TWTR, + 15.64%

.

As Twitter has proven in recent years, a social media service can survive without consistently adding lots of users, as long as it grows the amount of money it does for each user. Before Tuesday, bulls can at least point to enormous growth in Snaps ARPU, especially in Europe and the rest of the world, where Snap desperately needs an increase.

But that changed during the first quarter, when ARPU growth hit record low outside North America. In Europe, Snap reported 77 percent per user, an increase of 47 percent over last year, and it was 97 cents in the rest of the world, an increase of 68 percent. This is the first time that ARPU growth in the rest of the world has fallen below three-digit percentage gains and growth in Europe fell from 57% last quarter and 120% a year ago.

Snaps shares, which initially increased by more than 10% on the profit news, fell back before the redemption conference started. The share closed the afternoon session by 2.5%.

Snap has jumped on growth outside the US on a newly developed app for Alphabet Inc.

GOOG, + 1.34%

GOOG, + 1.26%

Android operating system that completed the final rollout last month. The updated app is the key to continuing to drive broader growth among young overseas users who often have smart phones with slower connections.

“There are billions of Android devices in the world that now have access to an improved Snapchat experience and We are looking forward to growing our Snapchat community in new markets,” said co-founder and CEO Evan Spiegel on Tuesday’s talks. and later adds that the company was excited about what it saw from the Android extension.

Investors will have to see that ARPU growth is recovering outside the US thanks to the Android app, but managers also noted another concern on that front – A slower-than-expected transition in Europe to more self-service ads, ARPU growth was lowered in North America last year, and Snap blamed the move to self-service advertising that is still happening across the pond as North America returns, with North America being the only region where ARPU growth grew in the first quarter. an increase of 34%.

“Europe … really delayed Nordam erika and the transition to self-service, so the effects are more pronounced in our annual sales and ARPU trends, while the rest of the world started at the auction, interim finance director Lara Sweet says at the conference call.

Since then, Snap has become obscured by the view of Wall Street that the largest growth in user base was over and that it became public after growth had peaked. The company now needs to make money from its users better, especially abroad, in order to get the kind of growth Wall Street is looking for, and its enhanced Android app and overcoming teams for the transition to self-service ads is the key to that potential.

If Snap wants to be seen as a promising investment again, it must encourage the growth of either users or average revenue per user, and preferably both.

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