The pandemic hasn’t been too terrible for Snap. The company behind Snapchat announced its second quarter earnings today, detailing how its business has fared during the COVID-19 outbreak around the world. Its user base is up by 9 million people daily over last quarter, and its revenue is up 17 percent year over year, at $454 million. Snap is positioning the growth as a win, especially given that advertiser budgets are shrinking amid a global economic downturn.
“The economic environment has become challenging for many of our advertising partners and this has had an impact on the rate of growth in our business,” says Derek Andersen, Snap CFO, in prepared remarks. The pandemic took an obvious hit on the company’s business. Year-over-year growth in January and February was approximately 58 percent, he says, before declining to approximately 25 percent in March. He went on to say the high growth early in the year suggests that, under normal market conditions, Snap could thrive.
Still, Andersen acknowledges that the economic forecast is foggy going forward and Snap’s success will likely depend on how long the pandemic continues and whether advertisers keep tightening their budgets.
“We are cautiously optimistic that trends could improve over time if conditions begin to normalize, but we are also conscious that economic conditions may not improve and some of our advertising partners could continue to face headwinds caused by the crisis,” says Andersen.
The user growth is encouraging for the company but also predictable given that many people around the world have been stuck inside with stay-at-home orders. The company says users check Snapchat an average of over 30 times per day, and CEO Evan Spiegel says in his prepared remarks that the team has seen an increase in “group activities,” like games, calls, and chats. Snap launched five games this quarter and saw average daily time spent in games more than double in the month of March, he says.
Snap is one of the first major social platforms to announce its second quarter earnings, but the story to follow will continue to be advertiser fallout amid the pandemic. Brands have, for instance, boycotted Facebook over its handling of incendiary posts from President Donald Trump, as well as ongoing issues with misinformation. Meanwhile, TikTok is facing a full-out potential ban in the US. Snap, for its part, is just weathering the storm, trying to bring more users into the fold and keep advertisers on deck.
