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Thread on the $SNAP Q3 earnings today.
I'll tell you why "Snaps Created per Day" is the most important metric (matters more than DAUs), followed by my thoughts on Snap's camera and ad platforms, Bitmoji in a post-Facebook world, Snap's content strategy, and the Snap Map
I'll tell you why "Snaps Created per Day" is the most important metric (matters more than DAUs), followed by my thoughts on Snap's camera and ad platforms, Bitmoji in a post-Facebook world, Snap's content strategy, and the Snap Map
I'll try not to repeat myself too much, but I've tweeted some of this stuff before. Here's a thread with my thoughts from the past few quarters.
Snaps per Day remains the key metric for Snap. The camera is a new distribution channel (ads, commerce, content, gaming), one where Snap has a significant advantage due to the ecosystem it has built and the Snapchat cameras high frequency of use (aka Snaps per Day per User).
Just like the news feed created a new distribution channel on mobile, the camera will likely become a significant channel for the AR equivalent of mobile apps (lenses), advertising and commerce (shop the look, tap to buy), content (AR), gaming (think Pokemon Go), and more.
Sanp's recent Amazon hires make sense: Amazon’s distribution model is its site/app (soon Alexa). The camera, specifically AR, represents an entirely new retail distribution channel that Amazon doesn't control, and could eventually render its own obsolete.
Snap's AR lenses are AR apps, and Lens Explorer is an AR App Store that's a precursor to a AR shopping.
Example: Advertisers pay for space in the Snap camera carousel or in a Snap Ad, which drives users to their browseable AR shop (in our outside Snap).
theverge.com/2018/7/10/1755…
Example: Advertisers pay for space in the Snap camera carousel or in a Snap Ad, which drives users to their browseable AR shop (in our outside Snap).
theverge.com/2018/7/10/1755…
Snaps per Day is important because it highlights how often users are USING this emerging distribution channel, the Snapchat camera (60% of DAU's create with it daily). Each camera use, or snap (especially in high GDP markets), is an opportunity for Snap to make money.
It's been interesting watching Snap's stock price plummet as the markets focus on DAU's, while (in my opinion) it continues tracking towards profitability before what Wall Street is expecting. Here's a thread that expands on that thought:
One thing to add on Snap's profitability is a recent example of Snap's low CPM's being attractive to advertisers. The 50% lower CPA seen with Snap's new Pixel (measures ad ROI, just left beta in June), hints CPM's in some categories could be bid up 2x.
digiday.com/marketing/dtc-…
digiday.com/marketing/dtc-…
Another example of advertisers benefiting from the recent Snap Pixel launch:
“The liquor brand has doubled its spend on Snapchat... this year, the company has seen a swipe-up rate increase of 321%, as well as a 67% decrease in our cost per swipe-up”
digiday.com/marketing/jage…
“The liquor brand has doubled its spend on Snapchat... this year, the company has seen a swipe-up rate increase of 321%, as well as a 67% decrease in our cost per swipe-up”
digiday.com/marketing/jage…
Recent "Teens prefer Instagram over Snapchat" headlines are deceiving. Snapchat's still their main communication tool, and their willingness to receive ads on it continues increasing. This, combined w/ the Pixel launch, is great for Snap's business model.
piper2.bluematrix.com/sellside/Email…
piper2.bluematrix.com/sellside/Email…
I dive into this in the thread below, but Snap likely has much more video ad inventory (not to mention AR ad inventory) than you’d think.
Snapchat has 100M monthly users in North America, and Snap Ads reach 93M of them, aka 93% of NA users watch Stories.
Snapchat has 100M monthly users in North America, and Snap Ads reach 93M of them, aka 93% of NA users watch Stories.
FB has touted video as its big growth driver for years and says 50M people spend at least 1 minute per month on Facebook Watch, watching 5X longer than spontaneously discovered News Feed videos. That's a floor of 2 secs/day, hard to monetize that w/ ads.
techcrunch.com/2018/10/17/fac…
techcrunch.com/2018/10/17/fac…
It's also likely that Snap has much greater scale in actual camera usage (aka AR) than any of the Facebook-owned apps. It's hard to find data points from Facebook (for good reason), but there's some data in the pic below taken from this article:
seekingalpha.com/article/416650…
seekingalpha.com/article/416650…
Considering Snap Ads reach a similar sized user base as FB/IG in the US/EU (70% of FB's revenue), all ads are full screen video and AR ads (more effective than a feed), time spent on both is similar, and there is a huge gap in CPM's, pricing could soon converge.
Snap CPMs are down ~90% since switching to higher margin self-serve auction pricing in 2017, which could represent a strategy switch from offering a premium product to being a low cost provider. Companies don't compete on both. Snap could be taking a high scale, low cost approach
Snap opening its camera and stories inventory to other publishers could hint it's working on a vertical video and AR ad network similar to what Facebook Audience Network and DoubleClick were for Facebook and Google (increase supply, improve ad targeting)
If a Snap ad network is widely adopted by publishers, it would push more advertisers to embrace vertical video and AR advertising, help small publishers reduce overhead, and would significantly expand Snap's ad inventory and economies of scale in both AR and vertical video.
A video/AR ad network could be powered by Bitmoji and SnapKit, making "login with Bitmoji" equivalent to what "login with Facebook" was pre-Cambridge Analytica.
The redesign may have hurt Snapchat, but it accelerated Bitmoji adoption (mostly US/EU), which now exceeds 134M users.
The redesign may have hurt Snapchat, but it accelerated Bitmoji adoption (mostly US/EU), which now exceeds 134M users.
Bitmoji is important because it's essentially a decentralized social network. They can be used anywhere, there's plenty of monetization opportunities, and they're essentially digital avatars - something everyone will need in AR/VR.
As the NYT mentions, Snap's developed tools to open up AR content creation to the rest of the world. Bitmoji lenses and AR effects in Snap Originals are just the start.
Snap is building the tools and scale to become the cable network of augmented reality
nytimes.com/2018/06/14/mov…
Snap is building the tools and scale to become the cable network of augmented reality
nytimes.com/2018/06/14/mov…
In their current form, Snap Shows are very interesting. They cost ~$35-50k per episode, and Snap has quietly grown the number of shows (3-5 minutes, 3 ads each) with over 10M unique monthly viewers:
Q1: 7
Q2: 11
Q3: 18
latimes.com/business/holly…
Q1: 7
Q2: 11
Q3: 18
latimes.com/business/holly…
The success of Snap Shows is important because they likely have high fixed costs w/ high contribution margins, meaning most revenue falls to the bottom line as the content business ramps
This goes for all Snap's ad units: Stabilizing/rising CPM's should quickly fall to profits.
This goes for all Snap's ad units: Stabilizing/rising CPM's should quickly fall to profits.
Playing around with the math on CPM's and views on Snap Shows, we can understand how important they will be in driving Snap's margin and profitability growth over time as Snap grows CPM's, ad mix, and total views in Discover.
Snap introducing AR lenses for shows is the next step in creating tools for AR/VR content creation (AR is simply contextually aware VR). Content has been called the most difficult aspect of AR/VR, and it has been embedded in Snap's DNA for over five years
inc.com/darren-heitner…
inc.com/darren-heitner…
Snap seems close to launching live TV for Discover publishers, which opens up more unskippable 6-second ads that traditional TV is also adopting, and interesting when considering AR content and Snap's longstanding commitment that Discover is TV for Gen Z.
If you listen to Snap's earnings calls, Wall Street wants Snap to monetize messaging. One way this is being done is with AR lenses, but I also think the Snap Map represents another option.
It's unlikely any company ever truly monetizes sending text messages to friends, but like the camera, the map represents an emerging distribution channel.
Morgan Stanley's Brian Nowak actually calls Google Maps "one of its most under-monetized assets".
barrons.com/articles/is-go…
Morgan Stanley's Brian Nowak actually calls Google Maps "one of its most under-monetized assets".
barrons.com/articles/is-go…
The Snap Map is not only a form of communication, but nailing precise physical location is going to be important in all forms of AR. Like many other things, Snap is developing the usage of something that will be important in 5-10 years, today (Snap Map, ad ROI, etc).
Like the news feed before it, the Snap Map is an emerging tool to talk to friends. As (and if) Snap shifts messaging to the Snap Map, it opens up new opportunities similar to Google Maps that are impossible in the default messaging screens of Snapchat, iMessage, Messenger, etc.
The Snap Map only works due to Snap's messaging network, which is its competitive advantage. This comes back to the Snaps per Day metric, which measures the overall health of Snap's competitive advantage. It continued tracking up post-IG Stories, only dipping after the redesign.
It's likely that Snap and the other large mobile social platforms have plateauing user bases in the developed markets. This isn't necessarily bad news, just that usage (Snaps per Day) and monetization will become more important.
