Analysis

Snapchat IPO filing reveals 158m daily users and $404.5m annual revenues


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Snapchat’s parent company Snap, Inc has published its long-awaited IPO filing, as the company prepares to go public. It makes fascinating reading for anyone who’s been following the growth of the app.

Here are some of the key points, from our first reading of the document:

“On average, 158 million people use Snapchat daily, and over 2.5 billion Snaps are created every day,” claims the company. It reportedly had 150 million daily active users in mid-2016, which hints at slowing growth on that metric since then.

In fact, Snap admits to that in the IPO filing. “Although Daily Active Users grew by 7% from 143 million Daily Active Users for the quarter ended June 30, 2016 to 153 million Daily Active Users for the quarter ended September 30, 2016, the growth in Daily Active Users was relatively flat in the latter part of the quarter ended September 30, 2016.”

Growth continued to be flat in early Q4, before accelerating towards Christmas. Why? Later on in the filing, Snap suggests some reasons for the Q4 flatness.

“We believe that the flat growth in the early part of the quarter was primarily related to accelerated growth in user engagement earlier in the year, diminished product performance, and increased competition,” it claims. That competition is fairly obvious: Instagram, which added several features mirroring Snapchat’s.

snapchat-growth

Engagement is pretty keen though. “On average, more than 60% of our Daily Active Users create Snaps with our Camera every day,” says Snap. “On average, our Daily Active Users visit Snapchat more than 18 times each day… Our community spends an average of 25 to 30 minutes on Snapchat every day.”

The 158 million daily active users break down into 68 million in North America, 52 million in Europe and 39 million in the rest of the world, with ‘Europe’ including Russia and Turkey.

Snapchat’s Stories feature also gets some stats in the IPO filing. “On average, over 25% of our Daily Active Users post to their Story every day,” claims Snap.

What about the financials? “Our advertising business is still young but growing rapidly. For the year ended December 31, 2016, we recorded revenue of $404.5 million, as compared to revenue of $58.7 million for the year ended December 31, 2015, representing a year-over-year increase of more than 6x,” explains the filing.

“Our global average revenue per user, or ARPU, in the three months ended December 31, 2016 was $1.05, compared to $0.31 for the same period in 2015. In North America, our ARPU in the three months ended December 31, 2016 was $2.15 compared to $0.65 for the same period in 2015.”

snap-revs

North America dominates Snap’s revenues: the continent accounted for $145.4m of the company’s $165.7m of revenues in the final quarter of 2016.

Snapchat is far from profitable, though. “For the year ended December 31, 2016, we incurred a net loss of $514.6 million, as compared to a net loss of $372.9 million for the year ended December 31, 2015,” it explains.

Breaking down those figures a bit more: in 2016 Snapchat’s $404.5m of revenues were outweighed by $451.7m cost of revenues; $183.7m of R&D expenditure; $124.4m of sales and marketing spend; and $165.2m of general and administrative costs.

Headcount is part of Snap’s swelling expenses. “Our employee headcount and the scope and complexity of our business have increased significantly, with the number of full-time employees increasing from 600 as of December 31, 2015 to 1,859 as of December 31, 2016,” the filing notes.

Snap also breaks down different demographics, a little, in terms of their engagement with Snapchat.

“Users 25 and older visited Snapchat approximately 12 times and spent approximately 20 minutes on Snapchat every day on average in the quarter ended December 31, 2016, while users younger than 25 visited Snapchat over 20 times and spent over 30 minutes on Snapchat every day on average during the same period,” it explains.

A fun detail from the information Snap provides on its growing advertising business: “When a music streaming service ran a Snap Ad campaign, Millward Brown measured that it drove a 30% lift in subscription intent, 2x the mobile norm, and a 24 percentage point increase in ad recall, 1.5x the mobile norm,” explains the filing. Place your bets on which streaming service that was.

There are also some stats for high-profile sponsored ‘lenses’ within Snapchat. 20th Century Fox ran several for its X-Men: Apocalypse film.

“In one day, people spent a collective 56 years playing with the Sponsored Lenses,” explains Snap. “They also incorporated the Sponsored Lens into Snaps they shared with their friends, which yielded over 298 million views for the campaign and greatly amplified awareness and anticipation for the movie.”

fox

Meanwhile, a sponsored geofilter in Snapchat from Under Armour was viewed more than 60m times, according to the filing. A Starbucks campaign including an ad, a geofilter and a lens reached more than 117m views.

An interesting note on how Snap is fuelling Google’s business: it uses the latter company’s cloud platform, and has signed a five-year licensing deal under which “we are required to purchase at least $400.0 million of cloud services in each year of the agreement”.

Also, despite having plenty on its plate, Snap is also pondering the potential impact of Brexit on its business, having committed to basing its European headquarters in London.

“We have licensed a portion of our intellectual property to our United Kingdom subsidiary and intend to base a significant portion of our non-U.S. operations in the United Kingdom,” explains the filing.

“The full effect of Brexit is uncertain and depends on any agreements the United Kingdom may make to retain access to European Union markets. Consequently, no assurance can be given about the impact of the outcome and our business, including operational and tax policies, may be seriously harmed or require reassessment if our European operations or presence become a significant part of our business.”

There is also some useful mission-statement material showing how Snap views itself and its main product.

“In the way that the flashing cursor became the starting point for most products on desktop computers, we believe that the camera screen will be the starting point for most products on smartphones,” suggests the company.

“This is because images created by smartphone cameras contain more context and richer information than other forms of input like text entered on a keyboard. This means that we are willing to take risks in an attempt to create innovative and different camera products that are better able to reflect and improve our life experiences.”

We’re updating this story as we go through the filing: keep refreshing for the latest data.

Stuart Dredge

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