Snap said that its revenues this month were running close to one-third higher than in July last year, signalling a rebound in spending by pandemic-hit advertisers, but it warned of headwinds in the rest of the quarter.
The Los Angeles-based social media group said that advertising sales growth had picked up after what was, for it, relatively weak rate of 17 per cent in the second quarter.
Its April-June revenues of $454m, published after the end of the trading day on Tuesday, were above analyst expectations of $448m, as compiled by S&P Capital IQ.
Estimated revenues so far in July were tracking 32 per cent higher, year-on-year.
But Snap’s chief financial officer Derek Anderson said the company was not banking on the strong start to the third quarter continuing at the same pace. Internal investment plans are based on a 20 per cent revenue growth estimate, he said.
“Advertising demand in Q3 has historically been bolstered by factors that appear unlikely to materialise in the same way they have in prior years, including the back-to-school season, film release schedules, and the operations of various sports leagues,” he said.
The company had 238m daily active users in the second quarter, 35m more than a year ago but shy of its own forecast of 239m. A boost that it enjoyed when countries went into coronavirus lockdowns had “dissipated faster than we anticipated”, it said.
On a call with analysts, executives also conceded that the company no longer expected to achieve a longstanding target of reaching profitability this year.
Snap shares, which fell more than 50 per cent to $8 as the coronavirus crisis took hold, have since soared to all-time highs — though they were down around 7 per cent in after-hours trading on Tuesday to below $24.
Snap’s second quarter net loss grew to $326m from $255m a year ago, as they company has increased investment, including in new advertising formats.
Jeremi Gorman, Snap’s chief business officer, said it was “difficult to ascertain” if it had won any business in July as a result of issues at rival Facebook, which has been boycotted by some advertisers this month for its stance on political speech and content moderation.
“What we do know is that it’s always positive to engage at the highest levels of an organisation and this conversation has opened the door for us to do that extremely frequently at the [chief executive] and [chief marketing officer] level,” she said.
In the latest quarter, Snap said it benefited from better ad targeting capabilities and strong demand for “direct response” advertising, in which brands tout specific products in the hope of getting customers to click through and make an impulse purchase. Snap recently launched new tools that allow brands to showcase catalogues of products.