Snap Inc. has reported impressive Q3 results, with a revenue increase of 15% year-over-year, reaching $1.37 billion—a performance that exceeded Wall Street expectations. The success was driven by a robust rise in direct-response advertising and the continued popularity of its Snapchat+ subscription service. With daily active users (DAUs) reaching 443 million globally, an increase of 37 million from last year, Snap is experiencing growth in both user engagement and advertiser interest.
More Advertisers, More Revenue
Snap’s advertising base doubled year-over-year in Q3, fueled by direct-response advertising, which grew 16% to help bring Snap’s ad revenue to $1.25 billion, marking a 10% increase from last year. Small and medium-sized businesses contributed significantly to this milestone, demonstrating Snap’s appeal as an advertising platform that caters to a wide range of businesses. Despite some softness in consumer discretionary sectors, Snap’s direct-response ads and Snapchat+ proved resilient, underscoring a growing demand for its targeted marketing solutions.
The Snapchat+ service itself has gained significant traction, with subscriber numbers more than doubling year-over-year to hit 12 million in Q3. This subscription boost reflects user loyalty and interest in premium features on the platform, further solidifying Snap’s business model.
CEO Evan Spiegel’s Vision: AI and AR at the Core
Snap CEO Evan Spiegel has consistently advocated for the company’s investments in artificial intelligence (AI) and augmented reality (AR) as essential to its long-term growth strategy. The latest earnings report underscored Snap’s dedication to these technologies. Recently, Snap expanded its partnership with Google Cloud to enhance its AI chatbot, My AI. The number of messages sent to My AI in the U.S. tripled in Q3 alone, suggesting users are increasingly embracing these interactive features.
On the AR front, Snap’s September launch of Easy Lens, which lets users create Snapchat Lenses using simple text prompts, highlights the company’s commitment to making AR accessible. This feature, along with Snap’s Olympic-themed AR lenses that attracted over 225 million users during the Paris Olympics, showcases how Snap’s AR technology can captivate a global audience. Such tools open up new avenues for brands looking to reach users in fresh and engaging ways.
Snap’s Expanding Ad Product Suite
To further diversify its revenue, Snap introduced several new ad offerings. Sponsored Snaps allow advertisers to send full-screen vertical videos directly to users, while Promoted Places let brands highlight locations on the Snap Map. This added visibility on the Map is expected to draw in advertisers from various sectors, especially retail and tourism. The Phantom House series, a branded content initiative, also returned in October with sponsors like Hulu, State Farm, and Maybelline New York, adding another layer to Snap’s growing ad ecosystem.
A Promising Outlook Amid Changing Consumer Preferences
As social media platforms adapt to a shifting digital landscape, Snap’s approach to combining user-friendly AI and AR tools with innovative ad formats gives it a distinct advantage. Looking ahead, the company forecasts an 11% to 15% revenue increase for the fourth quarter, bolstered by these strategic tech investments and advertiser gains.
By focusing on AI-driven features and personalized AR experiences, Snap aims to keep users engaged while offering advertisers a unique platform for reaching audiences. With robust user growth and a doubling of advertisers, Snap is well-positioned to continue its upward trajectory and further establish itself as a leader in the evolving social media space.