Snapchat shares surge after advertisers boycott Facebook

Laurence Dodds
·4-min read
Signage for Snap Inc., parent company of Snapchat, adorns the front of the New York Stock Exchange (NYSE), March 2, 2017 in New York City - Drew Angerer/Getty
Signage for Snap Inc., parent company of Snapchat, adorns the front of the New York Stock Exchange (NYSE), March 2, 2017 in New York City - Drew Angerer/Getty

Shares in Snapchat soared by as much as 21pc on Wednesday as advertisers boycotting Facebook and Instagram propelled it to blockbuster financial results.

The teen-centric photo-sharing app raked in revenue of $679m (£525m) during the three months ending in September, up by 52pc since the same time last year and far outmatching Wall Street's expectations of around $550m.

Its net losses also shrunk by 12pc year on year to $200m, while daily active users rose by 11m to 249m, thanks in part to growth in India and a rising foothold among over-35s.

Jeremi Gorman, chief business officer at the app's parent company Snap, credited some of the increase in revenue to this summer's advertising boycott against Facebook, in which hundreds of companies froze their spending in protest against the company's hate speech policies in the wake of the Black Lives Matter protests.

She said: "As organisations used this period of uncertainty as an opportunity to evaluate their advertising spend, we saw many brands look to align their marketing efforts with platforms who share their corporate values. 

"Our sales teams were able to hold many productive C-level conversations to discuss our brand safety positioning and privacy-by-design principles, which provided an opportunity for us to prove our efficacy and ability to scale. 

"We believe that the customer service our teams provided, the alignment on our brand safety principles, and the strong return on investment that our advertising partners achieved all contributed to our growth this quarter."

Snap's user trajectory since its IPO
Snap's user trajectory since its IPO

Derek Andersen, Snapchat's chief financial officer, added that advertising spending had recovered faster than the company had expected since the height of the coronavirus pandemic, and continuing 50pc growth in the next few months was  "attainable".

He said that a wave of advertisers and agencies auditing their online spending, whether for ethics or pandemic-proofing, had been "constructive" in expanding Snapchat's relationships with its customers. 

The app further benefited from the return of live sports in many countries, with more than 40pc of Generation Z in the United States watching sports content on the app's Discover panel in September.

Snapchat, whose central feature lets users send each other disappearing messages, has long sought to exploit the PR issues suffered by its gigantic rival Facebook, citing its relative lack of data collection.

Civil rights activists kicked off a mass boycott of Facebook this summer due to its persistent struggle to control extremism, as well as its decision not to censor a threatening post by President Donald Trump in May.

Facebook ad boycott
Facebook ad boycott

Last month Facebook reached a truce with the advertising industry, agreeing to new rules on reporting and removing hate speech. The company's own financial results next week will reveal whether the boycott actually hurt its income.

Advertisers had objected to its persistent struggle to control extremism on its service, as well as its decision not to censor a threatening post by President Donald Trump in May.

Snapchat has long been a David to Facebook's Goliath, which has ten times more daily users across all its services. The smaller app suffered from a botched Android redesign in 2017 and the copycatting of its trademark feature by Instagram in 2016. 

Since then Snapchat has clawed its way back to growth, building a more efficient advertising infrastructure, adding in-app video games and persuading numerous media and news companies to distribute content on Discover.

It has also made strides in augmented reality (AR), eschewing specialised headsets to project virtual objects, including adverts, onto the material world via its camera screen. However, it still does not make a profit.

Analysts credited that work for the company's newfound health. Tom Johnson of the media agency Mindshare praised its "innovative" advertising formats, while eMarketer's Debra Aho Williamson noted its "unique" AR promotions.

Evan Spiegel, Snapchat's 30-year-old chief executive, said the adoption of AR had "happened faster than we had previously imagined", becoming an "everyday behaviour" for Snapchat users as well as a lucrative experiment for advertisers.