Social networking giant Snap (SNAP) describes itself as a camera company. That's because its flagship product is a camera app called Snapchat that allows users to connect with family and friends, exchange photos (or Snaps) and videos (or Stories), and chat.
Founded in 2010, the company went public through an initial public offering (IPO) in March 2017. It generates all its revenue from Snapchat advertising. But the company faces significant competition from other major technology companies like Apple (AAPL), Meta (META) (including Facebook, Instagram, Threads, and WhatsApp), Alphabet (GOOG/GOOGL) subsidiaries Google and YouTube, TikTok, Pinterest, and X platform (formerly Twitter).
Snap's Financials
Snap announced financial results for the third quarter of 2024 on Oct. 29, 2024. Quarterly revenue came in at $1.37 billion for the quarter, which was a 15% increase over the $1.19 billion reported during the same period in 2023. The company reported a net loss for the quarter of $153 million compared to a net loss of $368 million in Q3-2023.
The majority of Snap's revenue comes from North America. This geographic segment includes the Caribbean and Central America under the company's financials. The U.S. accounts for almost two-thirds of this segment's revenue. This is followed by Europe, which also includes Russia. It's important to note that Snap halted advertising to Russian and Belorussian entities.
Snap's daily active users grew by 37 million or 9% to 443 million during the quarter from the same period in 2024.
Snap's Business Segments
Snap does not break out in its financial metrics by business segment. Advertising sales are the major driver of the company's revenue. The company also introduced other revenue models, including a subscription model and devices.
It also offers hardware devices, called Spectacles, which are glasses that connect to the Snapchat app and allow users to make Snaps and record videos. The latest version provides an augmented reality (AR) overlay for the user's view.
The Snapchat app can be downloaded to mobile devices free of charge. All of its features are accessible for free, including creating Snaps, conversing with family and friends, and finding friends' Stories on the Discover feature. These features are designed to drive user engagement, which in turn helps to attract advertisers.
Snap Ads allows advertisers to tell stories in a format comparable to that provided for Snap's users. It includes additional features, such as long-form videos, links to an advertiser's website, or to a download of an advertiser's app. AR Ads include Sponsored Lenses and Sponsored Filters. Sponsored Lenses provide branded augmented reality experiences. Sponsored Filters offer entertaining overlays that allow users to interact with an advertiser's brand.
Snap's Recent Developments
The company projected increased growth during the fourth quarter of 2024 with the expectation of adding more daily average users. Snap said it was encouraged by early testing results showing content engagement gains among less frequently engaged Snapchat users. It expects revenue growth of 11% to 15% on a year-over-year basis, based on an assumption of reaching 451 million daily average users in Q4.
On March 1, 2022, Snap announced it halted all advertising on its platform in Russia, Belarus, and Ukraine as part of an attempt to curb media disinformation amid Russia's invasion of Ukraine. The company said that it was also stopping its advertising sales to all Russian and Belarusian entities as well as complying with all sanctions imposed on Russian businesses and individuals.
The Bottom Line
Snapchat is one of the most popular social media apps, with 443 million daily users. Although the company has continued to grow, it has yet to earn an annual profit as it seeks to leverage its users to produce advertising revenue.