After warning investors back in May that its results would be impacted by highly erratic market conditions, Snapchat has today posted its 2022 Q2 numbers, which show a steady increase in usage, but also a slow revenue growth rate. Not the best news, but at least it points to Snap no longer totally being in the negative zone.
Road to A Rough Recovery(?)
To start, we’ll first take a look at user count – Snapchat added some 15 million more users in Q2, taking it up to a total of 347 million daily actives. However, upon closer inspection, a concerning element on this front is that Snap saw almost no growth in the North American market, which is by far its largest revenue driver.
The average revenue per user remains relatively low in other markets, especially in the ‘Rest of The World’ category, where Snap added the majority of its new users. Snapchat has been seeing significant growth in India, where mobile adoption and connectivity was steadily growing, helping expand Snap’s presence and reach. This is a positive for the app’s longer-term growth plans but doesn’t really provide a major boost to its revenue generation, at least not in the way that adding users in the US would.
As such, the current stagnation in US and European markets might further complicate things for investors – though Snap has also sought to restate its future-looking value via a new presentation on its expansion plans. Snap touts its expanding reach in various regions as a key value proposition, while it has also highlighted the importance of reaching this audience, based on key life milestones and related purchase activity. This is important because, as noted, Snap’s Q2 revenue results have been impacted by shifting market conditions
In all honesty, Snap’s revenue did grow, reaching $1.1 billion for the quarter, just that its growth rate is much slower than what the company has seen thus far. Snap’s leadership moves to reassure investors that it’s working to address this concern, despite evolving impacts. One way Snap has noted to resolve this is by maximizing its community growth initiatives, while also heavily investing in its direct ad responses and offers.
Whether any of these will change things isn’t certain as of now, but what’s commendable is the company’s proactive transparency in informing the market of its current standing. Snap is currently working to evolve its systems to maximize revenue benefit, so while it may not be able to grow its audience in some key markets as it does this, that may not matter for some time. The longer-term question is how long will Snapchat be relevant? Can it continue to invest in new advances like AR?
The Wrap
The bottom line is that Snap is still seeing positive growth, which does show potential for its future, regardless of any overarching questions that attempt to expound on the platform’s viability and feasibility. The real challenge for Snap now is maximizing its revenue potential in emerging markets. Since it’s not really seeing big growth in key areas, it has to prioritize making profits, lest it is forced to make really tough decisions on building towards the next stage.
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