Feb 24, 2021 - Technology

Snapchat says it's ready to start making big bucks

Data: Investing.com; Chart: Axios Visuals
Data: Investing.com; Chart: Axios Visuals

Snap Inc.'s stock hit an all-time high Tuesday after the company told investors it anticipates 50% annual growth in top-line revenue for the next several years. Its market cap reached over $100 billion for the first time on the news.

The big picture: Since its founding a decade ago, Snapchat has quietly grown its product to build a loyal audience of people mostly under the age of 30. Now, it says it's ready to finally start making money off of those users.

Details: Snap on Wednesday walked investors through its strategy to significantly grow its ad revenue by creating more opportunities to run ads in its non-messaging products, like its Snap Map and its new Spotlight video platform.

  • For example, Snap chief business officer Jeremi Gorman said the Snap Map, a highly-personalized map that shows what users are doing in real time, will "play a key role in onboarding small businesses." There are currently over 35 million businesses on the Snap Map.

In order to increase ad revenue, the company says it plans to make it easier for more advertisers to buy ads efficiently on the platform by investing in better self-serve tools for small businesses.

  • It also plans to build out its sales and marketing functions to support more global advertising partners, while investing in new ad formats, like augmented reality "lenses," which are branded filters that users can place over pictures and videos they send to friends.
  • To date, the majority of Snap's ad revenue come from vertical video ads called Snap ads inserted between user Stories — the strings of pictures and videos users share with friends.
  • In the coming months, Snap plans to invest more in premium content, like original and exclusive shows for its video platform Discover, which will help the company serve more lucrative branding ads against high-quality, vetted shows.

Be smart: Snap sees its biggest revenue growth opportunity in making more money from its existing user base in the U.S., which is by far the most lucrative digital ad market globally.

  • In a chart presented to investors, Snap explained that while it reaches nearly half of all smartphone users in North America, it only takes a small single-digit percentage of digital ad revenue in the region.

The big picture: Snap has been able to avoid most of the regulatory and industry pressure around issues like privacy and misinformation, in part due to the way it's been engineered and structured.

  • At a time when more people are using digital services than ever, that focus has allowed Snap to focus on innovation instead of being weighed down by regulatory and public relations headaches.
Go deeper