Snapchat’s Q4 2018 results surprised analysts
Snapchat-parent Snap (SNAP) beat all expectations and reported stellar revenue growth for the fourth quarter of 2018, causing the stock to surge over 20% in one session in February. The company generated revenue of $398.8 million during the quarter, a 39.6% increase from the same quarter in 2017.
eMarketer expects Snapchat to generate $1 billion in net ad revenue in the US next year. Reaching that milestone is taking the company longer than the research house expected. eMarketer blamed the slower-than-expected growth on the company’s change in strategy from a managed-service ad model to selling ads “programmatically.” The shift has caused the company to earn lower revenues per ad.
Snapchat’s US ad revenue is expected to reach $1 billion next year
However, despite the change in strategy and the stalling user base, eMarketer expects Snapchat’s US ad revenue to continue growing ~20% annually over the next few years.
Like other social media companies, Snapchat depends a lot on the US, its most lucrative market. Snapchat makes much more per user in the US compared to any other region as the graph above shows. Thus, it is critical that it doesn’t lose its US user base.
Meanwhile, the company is likely to roll out an upgraded version of its Android app, which could reel in more Android users. However, those users will be mostly based out of less lucrative markets. Snap has been mainly focusing on its iOS app in recent years.
Snap’s stock has been on a tear since December 21. It has more than doubled since then thanks to decent results, a couple of upgrades, and rumors of a push into gaming.