Snapchat Daily Users Pop 22% in Q4, Snap Tops Earnings Estimates But Issues Weak Forecast

TikTok-like Spotlight user-video section reached 100 million users in January


UPDATED: Snapchat gained 16 million daily users to hit an average of 265 million in the fourth quarter of 2020, continuing its solid growth during the COVID pandemic. Snap beat revenue and adjusted earnings estimates for the quarter, but its Q1 guidance disappointed Wall Street.

Snapchat’s daily active users were 265 million in Q4 2020, an increase of 47 million, or 22%, year-over-year.

Snap said Spotlight, its user-generated content section that presents videos in a personalized, TikTok-like feed, grew to over 100 million monthly active users in January 2021. Snapchatters who submit their videos to Spotlight are eligible to get a cut of more than $1 million daily. The company said it spent $40 million on Snapchat Spotlight, which debuted in late November, in Q4.

According to CEO Evan Spiegel, Snapchat is getting more than 175,000 video submissions per day on average from users — with the million-dollar daily giveaway a key lure.

“Our product and ranking teams have been able to quickly improve our ability to match Spotlight viewers with the right content, and we are now working on a broader rollout of Spotlight to our entire community,” Spiegel said on the earnings call. He said Snap isn’t focused on delivering ads in of Spotlight right now but said the company will experiment with monetization “down the road.”

Revenue in the quarter increased 62%, to $911 million, while it narrowed its net loss to $113 million compared with $241 million in the prior-year period. Adjusted earnings per share were 9 cents. Wall Street analyst consensus estimates had pegged Snap’s Q4 revenue coming in at $857.4 million and adjusted EPS of 7 cents, according to Refinitiv.

Snap shares fell as much as 10% in after-hours trading Thursday, after the company forecast Q1 revenue to be between $720 million and $740 million and adjusted EBITDA of -$70 million to -$50 million, lower than analyst forecasts. Snap estimated that DAUs would reach 275 million in Q1, a decline from the sequential user growth rates it reported throughout 2020. CFO Derek Andersen said the Q1 revenue guidance factors in potential “interruptions to demand” stemming from Apple’s iOS 14 changes requiring user opt-in to allow ad tracking, which he said is expected to be implemented in March.

Media Earnings Q4 2020

Snap delivered its first full year of adjusted EBITDA profitability, reporting $45 million, Spiegel noted. He added that “as we look towards the future, we’re excited to build on our investments in augmented reality, mapping, and content to drive our ongoing growth.”

On average, Snapchatters opened Snapchat 30 times every day in Q4 2020 and around 200 million users (75% of its total base) engaged with AR features and content daily. On average, the app’s users create more than 5 billion Snaps every day.

Spiegel, on the earnings call, touted Snapchat’s content engagement. Over 90% of the U.S. Gen Z population watched shows and publisher content in the app in the quarter, according to the company. Another metric Spiegel highlighted: Snapchat saw a 25% year-over-year increase in viewership among users 35 and older.

In Q4, the company launched 10 new Snap originals in the quarter, including Season 2 of Will Smith’s “Will From Home,” which has reached 43 million total viewers over the two seasons, Spiegel said.

During the week of the 2020 U.S. election, nearly 30 million users watched election-related coverage on Snapchat Discover from media partners. And in Q4, Snapchat launched a record 97 new international Discover channels, according to Spiegel.