Snapchat's daily active users rose to 187 million in the quarter that ended December 31 from 178 million in the third quarter, beating analysts' average expectation of 184.2 million users, according to financial data and analytics firm FactSet.
Investor enthusiasm in the instant messaging company faded following last year's initial public offering.
"Programmatic is the fastest growing element of the business", said Snap's chief strategy officer, Imran Khan, speaking on its subsequent earnings call, with leadership also claiming the introduction of the auction model helped double the number of advertisers spending on the platform. The company had revenue of $207.90 million during the quarter, compared to analyst estimates of $236.71 million. Daily users grew 18 percent year-over-year. The figure is monitored closely by investors who have the hope that user growth translates into more advertising revenue.
But he said more needed to be done, in particular making sure the company maintains the quality and relevance of its content, especially as it aims to catch up to Facebook Inc.'s juggernaut Instagram. Analysts, though, said that Snapchat appeared willing to look inward and try to fix problems rather than be distracted by Instagram. Not only that, the more competition for Snapchat's inventory, the more bigger brands may need to spend to reach a wide swath of people, since smaller brands are typically willing to pay more per ad to reach a smaller but more specific audience (provided Snapchat continues to prove it has enough users and ad-targeting chops for brands to reach those small, specific audience segments). Snap's executives chalked it up in part to moderating headcount and not buying back employees' shares during the quarter.
But revenues were better than expected, jumping 72 percent year-on-year to $286 million. Over the last ninety days, insiders sold 3,513,592 shares of company stock worth $45,994,369.
Shares traded at $17.73 after the bell, up 26 per cent after trading even higher earlier.
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In the previous quarter, Snap took a write-down from poor performance of the Spectacles video sunglasses, and it announced a re-design of the app that would make it easier for users to use. Their quarterly revenue rose by 46%, to $285.6 million (which exceeds expectations by upwards of $32 million).
"Our business really came together towards the end of a year ago", chief executive officer Evan Spiegel said in a statement.
The company reported its loss widened to $350 million in the last three months of 2017 after a $170 million deficit a year earlier.
Several other brokerages have also recently issued reports on SNAP.
Deutsche Bank analyst Lloyd Walmsley said in a note about the Q4 Snap earnings release that although he had picked up improving user trends before the release, the company also showed strength in advertising, which he called a "complete surprise".