Snap’s 2021 Q4 results skyrocketed, taking its stock price soaring and leaving many asking whether we’ve been ignoring the return of a social media giant. Tom Jarvis, founder and chief executive officer of Wilderness, considers the rise of the platform and whether it’s here to stay.
With revenue rising 42% year-on-year to $1.3bn against analysts’ predictions of a forecasted net loss, Snap reported daily active users grew 20% in Q4 against the same period in 2020, to 319 million users – a sharp contrast to Facebook’s Q4 results.
Notably, Snap’s recent growth has come from countries outside of the US and Europe as it looks to gain ground on Facebook, Instagram and most importantly TikTok. Interestingly, India is one of Snap’s fastest-growing markets and it seems to have benefited from the Indian government’s decision to ban TikTok. Many young users have moved over to Snap and continue using the app on a daily basis, driving increased revenue.
Part of the success of Snap is down to its attractiveness among its core, young user base. The feature-rich app provides users with interactive augmented reality (AR) filters and lenses, giving them a reason to return multiple times a day.
This is all well and good, but Snap’s trojan horse is really its messaging feature. For many young users, this is their default communication tool. The average user on Snap shares 34 messages a day. This has made it incredibly ‘sticky,’ especially for younger generations who use it to keep in touch with close friends and small groups. It’s a way to arrange meet-ups and organize parties, mirroring the way Facebook grew out of university campuses in the mid-late 2000s.
Snap is benefiting from the desire to move to more closed platforms and the rise of messaging apps as the default method of social communication. In 2021 an estimated 3.09 billion mobile phone users accessed over-the-top messaging apps to communicate. This figure is projected to grow to 3.51 billion users by 2025 – a 6.1% rise, according to research from eMarketer.
For a long time, the word on the street was that Meta would purchase Snap. It’s reported that Snap chief executive Evan Spiegel rejected at least two formal offers for the company back in 2013 and again in 2016, a year before it went public. But with legal challenges to its recent acquisition of Giphy, Meta and the other big tech giants are unlikely to be in a position to acquire Snap any time soon, leaving it space to continue to innovate and monetize its incredible engagement among the gen Z userbase.
Now, though, Snap has finally turned a profit and found a way to monetize its endless innovation on the platform, in a way that seems to work for its predominantly younger fan base. With regulatory challenges on the horizon in the US and Europe for Meta and potentially TikTok, it could be that Snap is the one to profit, especially as their recent growth has come predominantly from India.
Evan Speigel has been keen to point out that Snap is on a mission to reinvent the camera, and much of the platform’s innovation will be focused on more ways for its audience to engage with AR experiences. Already over 75% of Snap users engage with AR daily on the app, and Snap is working hard to present its young user base with more ways to engage with emerging tech. This includes a recent scan feature, which lets users take pictures of items to generate information and/or recommendations. Snapchat users will also be able to virtually try on clothing and accessories, using upgraded technology that detects and responds to body movements and facial dimensions. Other new tools include Snapchat Lenses, brand shops and product catalog integrations, and virtual stores.
The company also recently announced an upgrade to its AR Shopping feature, which now allows brands to add real-time pricing and additional product details. This points directly to Snap’s social commerce ambitions through the use of AR lenses and filters. And according to a recent Snapchat survey, 93% of its users are interested in using the technology for shopping, with users engaging with AR filters a reported 6bn times a day.
If the future of social commerce is AR driven, then Snap currently stands as the app to profit most from these new methods of communication. This could mean that the app’s recent growth and move to profitability is just the start of a meteoric rise, as it finally joins the ranks of larger social media platforms. My bet… don’t sleep on Snap. It might just be a giant.
Tom Jarvis – CEO & Founder