Advertisers triple upfront commitment with Snap

Advertisers are spending more with Snap as the world reopens. 

Snap reported US$770 million in Q1 revenue Thursday, an increase of 66% year-over-year, as the number of advertisers it works with roughly doubled.

Snap’s ad business is growing on all fronts. Over half of the platform’s revenues now comes from direct response advertising. But Snap also tripled the number of upfront commitments it received from brands this year over 2020. 

Snaps’ user base grew 22% to 280 million over the same time period, while average revenue per user increased to $2.74, up 36% year over year. 

The majority of Snap’s user base uses Android devices, insulating it somewhat from upcoming tracking changes on Apple’s iOS 14.5.

Ad rebound

Advertisers are ramping up spend on Snap as the world rebounds from the pandemic and the ad economy heats back up. 

Snap, which has been beefing up its direct response and e-commerce capabilities, is seeing travel and leisure advertisers hit hard by the pandemic returning “with a fury,” chief business officer Jeremi Gorman said, pointing to the company’s acquisition of AR e-commerce platform Fit Analytics in March.

The platform is also seeing interest from ecommerce, CPG, technology, streaming, online education and telco brands. 

“[We’re seeing] the return of some categories in which we are historically strong, [such as] theatrical and movies,” she added. 

Snap is prioritising AR, working with brands including Sweat, Gucci, The North Face and American Eagle on branded lenses in the quarter. Almost half (40%) of Snap users engaged with filters daily in Q1, more than half of which were branded.

“Augmented reality remains one of our biggest opportunities as we look to the future, and we are investing heavily in both core technology and the community-facing AR experiences on our service,” Evan Spiegel, co-founder and CEO at Snap said on the earnings call. 

Snap also launched a TikTok-rival feature, Spotlight, in Q4, which more than 125 million people used in Q1. The feature is now available in India, Mexico and Brazil.

The IDFA to drop

Snap still doesn’t know the degree to which Apple’s App Tracking Transparency changes, expected to go into effect on Monday, will impact it’s business. But the company is projecting 80% growth in Q2.

“It is not clear yet what the longer term impact of the iOS platform changes may be for the topline momentum of [the] business,” chief financial officer Derek Anderson said on the call. 

Apple’s decision to delay the changes until April has given Snap time to implement SKAdNetwork, Apple’s solution for measuring user activity across its apps, which it is testing with partners along with other “privacy-centric” solutions, Spiegel said.