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Q1 earnings from Snap today:

- Added 11 million DAUs (up 5% from Q4, 20% YoY)
- Hints at 30-50% user growth in March
- Revenue up 44% in Q1 (was 58% through end of Feb)
- 75% of DAU's interact with AR daily (up from 70%)
- Arguably best quarter since IPO…
Snap reported DAU's were up 11 million in Q1 (5% QoQ)

Very significant because Snap reports DAU's as an average over the ENTIRE quarter (FB + Twitter report as of final month, Pinterest as of final day)

It's possible Snap’s DAU's were up 30-60 million to end March (30-50% YoY)
Why is Snapchat growing at the fastest rate since Instagram Stories launched?

It re-built ('16-'18) and re-launched ('19) its buggy Android app. Android has 70%+ global market share; hard for Snaps 1:1 messaging network to grow outside iPhones, which are used by ~80% of US teens
In addition to reaching the 90% of US 13-24 year olds (75% of 13-34) Snap has done since Q1 ‘19, Snap now reaches 80% of 13-24 year olds in the UK, France, and Canada (60% of 13-34). Also “growing rapidly” in other markets, specifically India (see chart)
Why are US users important for Snap?

They likely have a 10x higher ARPU ceiling than non-US users, and can bring in $10-15b of revenue for Snap based on existing ad products (video, AR, and maps). That revenue will have very high margins.

More here 👇

Snap usage metrics in Q1:

In March
- Total time spent up 20% MoM (30% in UK and France)
- Time on video/voice calls up 50%
- Time playing with AR lenses up 25%
- Time playing Snap Games 2x'd
- 19% increase in ad swipe-ups, 36% increase in app install ads…
Medium-term, Snap Games will be massive:

- $77b market, per Snap
- 43% of DAU’s played Snappables AR games in Q3 ‘18
- Likely opens up over time (Game Kit??)
- Integrates with the ad platform: in-game items, full-screen video ads, full-game sponsorships

Snap’s content business:

- Time spent watching Discover content up 35% YoY
- Time on premium Snap Shows up 2x YoY
- 60+ Shows now reach over 10+ million users
- 50% of Gen Z in US now gets news from Snapchat
- Will Smith filmed a series from his garage, got 15+ million viewers
Snap also mentioned they believe their production teams will be back in production by mid-Summer. Big outstanding risk for the premium content business is how long the US practices shelter in place (great news for TikTok).
Snap AR / camera usage in Q1:

- Over 4b snaps sent per day (17.5 per user)
- 75% of users interacting with AR daily (up from 70% from Q3)
- Snap’s Desktop Camera daily downloads up 30x
- Time spent playing with AR lenses per day up 85% YoY
Why does camera usage matter for Snap?

The camera is a distribution channel (ads, commerce, content, gaming), one where Snap has a significant advantage due to the camera-based messaging network it built 👇 and the Snapchat cameras high frequency of use

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 (Pokemon Go), and more.
Snap’s ad business:

- LOTS of discussion on ad optimizations (for purchase, installs, pixel tracking, advanced bidding, campaign management)
- Revenue that included pixel targeting up 2x YoY
- Direct response revenue up 2x YoY, now over 50% of revenue (was in beta thru late '18)
More on Snap’s ad biz:

- Launched web-based AR ad builder
- Sales team doubling down gaming, home media, e-comm, and CPG
- Upfront commitments for 2020 are up 2x from 2019
- Hints at further opening up API’s both its video and AR advertising platforms
Snap only started building its self-serve ad platform in 2016. In four short years, it continues closing in on feature-parity with Facebook and Google.
Snap implied Q1 ad impressions were up 5%, pricing down 23%

Contrast with time spent increases:
- Discover up 35% YoY
- AR lens play time up 85% YoY
- Games up 2x in March

Beyond optimizing, plenty of levers to lowering pricing for advertisers while growing its own revenue 50%+
Snap Kit Q1 updates:

- 120 new partner apps (added 150 in Q4)
- 15 partners in iOS Top 100 in January
- YOLO at 10m MAUs
- Snap Kit MAUs up 75% in Q1 (had 100m in Q3 )

We'll likely see startups continue building on Snap's rails 👇

Why is it important to Snap that other companies build on its platform?

If you squint, Snapchat camera lenses are ARs equivalent to mobile apps. A generation of 229 million early adopters play with them over three minutes per day, and over 165k were created in Q1 (highest ever).
Snap Kit has benefits today (user retention, revenue); and also builds Snap towards the inevitable transition from mobile to spatial computing. It's whole platform will eventually become a camera-based operating system built on the Snapchat camera.

On Snap's cost structure:

- Despite ~30% higher usage, only $6m in additional hosting costs vs Q4 (this is actual cash paid to AWS / GCloud 👉 )
- Generated $6m in cash from operating activities, only burned ~$5m when looking at FCF (call it break-even)
Snap’s Q2 Guidance:

- Users up to 239m, 4% QoQ (18% YoY)
- Revenue was up 15% YoY through Apr 19th (up 48% in Q1), 11% last week
- $2.1b in cash on-hand, access to $1b line of credit

Overall, still lots of uncertainty on what exact user and revenue numbers will look like in Q2
Amidst declining sales, its likely marketers shift ad budgets to digital channels with proven ROI. Morgan Stanley forecasted big drops in digital ad revenue this summer 👇, and long-term I think this accelerates an inevitable shift to more measured spend

This was arguably Snap's most impressive quarter since it IPO'd; and the majority of the groundwork for it was laid as the world was writing them off in 2018 and 2019. Congratulations to the whole team!
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