POV: Snap and Twitter Results
Mindshare Point of View
Both Twitter and Snap Inc. have posted their latest results and both have given investors and the market some cheer.
Details and Implications:
Twitter: Overall revenue in Q4 rose 2% year on year to $732m (v $717m in Q4 ’16), with ad revenue rising 1% year on year to $644m (v $638m in Q4 ’16). US ad revenue fell 10% year on year to $342m (v $382m Q4 ’16), but international ad revenue rose 18% in the same period to $302m (v $256m Q4’16).
Importantly for the market and investors, Twitter delivered its first quarterly profit on a GAAP basis. It posted a profit of $91m for Q4 (v -$167 in Q4 ’16), which saw its shares surge to a two-year high. Monthly Active Users, one of the key metrics used to gauge the popularity and potential growth of the platform, were flat from Q3 to Q4 at 330m, but up 12m year on year and daily active users rose 12% year on year.
“Q4 was a strong finish to the year,” Twitter CEO Jack Dorsey said in a statement. “We returned to revenue growth, achieved our goal of GAAP profitability, increased our shipping cadence, and reached five consecutive quarters of double digit DAU [daily active user] growth. I’m proud of the steady progress we made in 2017, and confident in our path ahead.”
Snap Inc.: Snap beat its revenue estimates for Q4, posting $285.7m versus an estimate of $256m.
Snapchat (the app) reported 187m daily active users for Q4, up from 178m in Q3 and daily users were up 18% year on year, reversing a recent trend of slowing growth. Crucially, average revenue per user was also up in Q4 at $1.53 up 46% year on year and 31% over Q3 ’17. Shares in Snap rose as much as 50% on the positive news.
"We executed well on our 2017 plan to improve quality, performance, and automation, which removed friction from our advertising business and improved our application for the Snapchat community" said Snap CEO Evan Spiegel.
Cheery news for both Twitter and Snap is good news for the whole industry. More viable global advertising platforms makes a better and healthier market. The two sets of results differ slightly in that Twitter controlled much of its cost in conjunction with a smaller rise in revenue to achieve profitability, whereas Snap had a larger % jump in revenue, albeit from a smaller base. Both Twitter and Snap have a big year ahead to capitalise on this good news and will need to continue to innovate to stay ahead of the behemoths and not be swallowed up – if they can do this, it will be good news for the overall market.