Snap IPO: With 158M daily users, Snapchat’s parent company made $404.5M in 2016
Snapchat's daily audience growth has decelerated from 17% between Q1 and Q2 2016 to 3% between Q3 and Q4.
Snapchat’s parent company, Snap Inc., formally filed to go public on Thursday, offering the first official look at how the mobile app’s ad business is doing.
Last year, Snap Inc. made $404.5 million, up from $58.7 million in 2015. The large jump has a lot to do with the fact that Snap Inc.’s business, which centers around Snapchat, is still very young.
Snapchat opened its advertising business in October 2014, and that business accounted for 96 percent of its parent company’s total revenue last year. Snap Inc. also made money from sales of its video-recording sunglasses, Spectacles, but said that Spectacles “has not generated signficant revenue.”
Of the revenue that Snap Inc. generated in 2016, $365.0 million was generated directly by the company, and $34.9 million came from partners, like publishers who sell ads to run in their channels within Snapchat’s Discover section and share the revenue with Snap Inc. In 2016, the company paid out $57.8 million to content partners, such as Discover publishers, up from $9.6 million in 2015.
Snap Inc.’s revenue has grown at a much steeper rate than its flagship app’s daily user base. By the end of 2016, Snapchat’s revenue had grown by 589 percent, while the five-year-old app’s daily user base had grown by 48 percent year over year to total 158 million people.
Problematically Snapchat’s quarter-over-quarter daily audience growth has decelerated since the second quarter of 2016. From Q1 to Q2, it increased by 17 percent. But then from Q2 to Q3, it increased by 7 percent, and then from Q3 to Q4, it increased by 3 percent.
While Snapchat’s user base may not be growing as robustly, the amount of money Snap Inc. makes per user is. In the fourth quarter of 2016, Snap Inc. averaged $1.05 for each it user it had around the world, up 239 percent year over year from $0.31. And it especially banked off its users in North America, each of whom converted into $2.15 in revenue for the company, up 231 percent year over year from $0.65.
The 158 million people who use Snapchat daily typically spend 25 to 30 minutes in the app over the course of the day. Of those daily users, more than 60 percent use it to send private messages to friends, and more than 25 percent post photos or videos to their public Stories.
Confirming popular perception, Snapchat’s younger users use it most often. According to the filing, Snapchat’s daily users who are 25 years old or older check it 12 times a day for a total of 20 minutes, whereas daily users who are under 25 years old check it more than 20 times a day for a total of more than 30 minutes spent in the app.
While Snapchat is largely a way for people to send photos and videos to one another, it distinguishes itself by letting people augment those photos and videos, such as by drawing or writing on the photos and videos, adding augmented-reality animations, or “lenses,” or overlaying static illustrations called “filters.” Of the snaps that people send every day, 60 percent incorporate these visual effects. And more than 1 billion snaps featuring location-based filters, or “geofilters,” are viewed every day, though the company didn’t say how many of those views are of sponsored geofilters. More than one-third of Snapchat’s daily users “plays” with lenses every day, which could include trying them out without using them in Story posts or private messages. Snap Inc. didn’t provide any stats specifying how many people actually post or view snaps featuring lenses, but it did include a chart showing how lens usage has increased since the feature was introduced in September 2015.