Facebook Boycott ‘Opened the Door’ for Snap to ‘Engage’ With New Advertisers
A senior Snap executive walked gingerly around questions Tuesday on whether Snap's ad revenue is benefiting from the Facebook ad boycott inspired by the Stop Hate for Profit campaign. It’s “difficult to ascertain exactly what the impact of the Facebook boycott is on revenue at this time,” said Chief Business Officer Jeremi Gorman on a Q2 call.
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Gorman speculated some of Facebook’s lost ad revenue could be "related" to cuts in advertisers’ “overall content marketing budgets, just given the environment” of COVID-19. The Facebook hate-speech “conversation has opened the door for us” to “engage” with potential new advertisers “at the highest levels of an organization,” including the CEO or chief marketing officer, he said. Facebook didn't comment Wednesday.
Snap was “designed in a brand-safe, hand-curated way since the beginning” to weed out hate speech, said Gorman. “There is no town hall or ability for an unvetted user to post to our whole community. As advertisers evaluate platforms that align with their values, these deliberate decisions made years ago are of paramount importance.”
The global health crisis “accelerated the shift to a more digital economy,” said Gorman. Snap’s advertisers “are exploring more ways to offer services digitally, including at-home fitness apps, online education programs, retail stores and restaurants offering online ordering and delivery services, and mobile-first banking and trading,” he said.
The pandemic is encouraging all business owners “to adopt digital marketing methods to engage with their customers globally, and we are well-positioned to take advantage of this shift,” said Gorman. “Our early investments in building the fundamentals of our global business have paid off, and have resulted in our highest number of active advertisers to date this quarter.”
More e-commerce companies are adopting the Snap ad platform to achieve their “down-funnel purchase objectives,” said Gorman. Chipotle launched a new free delivery campaign on Snapchat in Q2 to drive increased purchases at the Chipotle online stores and within its app, he said. The campaign sparked a threefold increase in the number of “attributed purchases” compared with Q1, he said.
The Snap “community” of “daily active users” grew 17% year over year in Q2, with 238 million people using Snapchat “every day on average in the quarter,” said CEO Evan Spiegel. The past three quarters have given Snap its highest year-over-year growth rates in three years, he said. “We now reach more than 100 million people in the U.S. alone.” It’s experiencing strong growth in its “core markets” in Europe and Australia, he said.
Snap’s ad revenue grew 17% to $454 million, despite “extreme dislocations in the market,” said Spiegel. As hard-hit industries like travel and theatrical entertainment “pull back spend,” he said, "we have transitioned to helping them plan for a future recovery led in part by our audience.” Other industries like streaming and e-commerce that have thrived from “some of the COVID-related changes in consumer behavior” have been “leaning in as advertisers on our platform,” he said.
Though the ad revenue increase exceeded plan, “the path to this outcome was not a straight line,” said Chief Financial Officer Derek Andersen. “The operating environment has remained challenging as COVID-19 continues to impact macroeconomic conditions, and the businesses of our advertising clients." The advertisers hardest hit in the pandemic are those that “rely on in-person interaction with their customers,” he said.
Many advertisers also “paused spending for periods” in Q2 so they could “swap out their ad creative for messaging that was more appropriate for the given moment,” said Andersen. “These challenging circumstances interrupted otherwise robust momentum.” The stock closed 6.4% lower Wednesday at $23.20.
Snap is withholding Q3 financial guidance but estimates quarterly revenue growth through Sunday was 32% year over year, said Andersen. “While we are cautiously optimistic that these trends could sustain over time, we are also conscious that operating conditions may remain volatile, and that economic conditions could further deteriorate.” Ad demand in Q3 historically has been bolstered by factors “that appear unlikely to materialize in the same way” as in previous years, including back-to-school promotions, he said.