Shares of Snap Inc. (NYSE: SNAP) soared over 24% on Friday, a day after the company delivered stellar earnings results for the second quarter of 2021. Snap beat Street expectations on revenue, earnings and user growth and also provided a strong guidance. Here are four points worth noting from the report:
Snap’s total revenue grew 116% year-over-year in Q2 2021 to $982 million, helped by improvement in the operating environment and strength in advertising. The company was also not impacted much by the iOS platform policy changes that were expected to hinder advertising demand during the quarter. In Q2 of last year, advertising demand was significantly impacted by the pandemic.
Revenue from North America grew 129% while average revenue per user (ARPU) rose 116%. Revenue from Europe rose 94% with a 76% increase in ARPU. Rest of World revenue grew 86% YoY with a 20% spike in ARPU.
For the third quarter of 2021, Snap expects revenue to come in the range of $1.07-1.08 billion, reflecting a growth of 58-60% YoY.
User growth and engagement
Total daily active users (DAU) grew 23% YoY to 293 million in Q2. Users grew both sequentially and year-over-year across all regions with the highest YoY growth of 55% coming from Rest of World. Snap saw improvement in engagement levels during the quarter, with an increase in the global time that users spent watching content on Snap.
The number of daily viewers of Stories grew YoY but there was a drop in the daily time spent on watching Stories. Snap believes this could be due to a drop in the volume of daily Story posting activity on Snapchat and expects this to pick up once the restrictions ease and things go back to normal. Snap currently expects DAUs to grow approx. 21% YoY to reach around 301 million in the third quarter.
Snap saw significant progress on its augmented reality (AR) platform in Q2. Over 200 million Snapchatters engage with AR daily, on average, and over 200,000 creators use Lens Studio to create AR Lenses for the Snapchat community.
Beyond enabling the creation of engaging content, AR is beginning to play a key role in online shopping by helping users virtually try on clothes or shop for outfits using a scanned photo or screenshot thereby improving their shopping experience.
These features are expected to help in increasing the conversion rates for purchases as well as reduce rate of returns for online shopping. Snap sees significant opportunity in this space as returns cost businesses billions of dollars each year.
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