Snapchat parent Snap Inc's bet on augmented reality seems to be paying off. Over 250 million Snapchat users engaged with its augmented reality (AR) features on a daily basis across a variety of use cases, including entertainment, fashion and education, CEO Evan Spiegel said during the company's earnings conference call on April 21.
For Q1 2022, Snapchat parent Snap Inc reported a daily active user base of 332 million, an 18 percent increase year-on-year (YoY).
He says that over 250,000 creators have built more than 2.5 million lenses that allows users to add special AR effects to their photos, videos or livestreams and Snapchat users have made use of these lenses more than twice as much in Q1 2022 when compared to Q1 2021.
In recent months, Snap Inc has launched new features that help creators to build location-based lenses for local places along with upgrades to their AR shopping experience. In March 2022, the company also acquired NextMind, a Paris-based neurotech company, to strengthen its AR research efforts.
Spiegel said they have launched a new AR creator programme in India, powered by its Lens Studio software, in an "effort to educate our community on the power of AR". The programme will include an online developer course and a series of challenges that aim to empower developers and local creators across the country.
He mentioned that they are also witnessing a growing demand from businesses to integrate its AR capabilities on their websites and applications through Camera Kit.
"With our developer tools in Lens Studio and distribution through Snapchat, Camera Kit and Spectacles, we have created a compelling platform for creators to build and share augmented reality experiences, reaching hundreds of millions of people and exploring the next generation of computing," Spiegel said.
In India, Snap Inc has struck partnerships with companies like Flipkart, Sharechat's Moj, Sugar Cosmetics and MyGlamm to power their AR features.
Snap Inc chief business officer Jeremi Gorman noted during the call that we are still in the early stages of AR advertiser adoption, however they are making good progress and it is just a matter of time until "advertising dollars follow, although that will continue to take time and work and effort"
"A top priority for AR is reducing the barrier to creation and helping brands understand the importance of AR experiences and the value they can drive. We believe that virtual try-on represents a massive opportunity to improve the way our community shops and experiences new products" Gorman said. She noted that about 70 percent of their AR revenue is coming through their self-serve ad platform.
She also mentioned that they will continue to invest heavily in building the tools to make that easier for brands. This includes making it easier to create AR, manage AR, and deploy the AR experiences, and then give them permanent destinations like 'Public Profiles for those AR experiences to live evergreen'.
India success story
During the earnings call, Spiegel reiterated that India has been a great success story for them. He has previously said that learnings from Snap Inc's expansion efforts in India is helping the company grow its base in new markets. In October 2021, Snap Inc had announced that it had reached a milestone of 100 million monthly active Snapchat users in the country.
“We have made significant investments to localise the Snapchat experience for the Indian community. We have added culturally relevant content, developed highly active and creative local creator communities, and invested in local products, marketing initiatives, and language support,” Spiegel said in October 2021.
Ads on Spotlight
Snap Inc has begun testing ads on its short video feature Spotlight, albeit in a limited fashion, Spiegel said during the call. In February, Snap Inc had announced plans to introduce mid-roll advertisements in its flagship feature Stories for prominent creators or public figures, which the company calls as Snap Stars. These creators will receive a share of the ad revenue generated from their public Story.
Spiegel said they have noticed that creators are posting videos to Spotlight to try to get more distribution and attract more subscribers to their ad-supported Stories.
"We are really excited about the momentum and growth of Spotlight and all the incredible original content that’s being created by our community. So, we will continue to be investing there and of course, testing advertising on Spotlight, because we think it’s going to be a great place for advertisers" he said, while noting that Spotlight's full-screen vertical ad format have already been widely adopted by advertisers across the world.
Challenging quarter
Overall, Spiegel noted that the first quarter of 2022 was "more challenging than we had expected". Total revenue grew 38 percent YoY to $1.06 billion for the quarter while it posted a net loss of $360 million, compared to $287 million in the prior year.
Snapchat Chief Financial Officer Derek Andersen said during the company's earnings call that they were initially on track to hit 44 percent growth in Q1 2022, however they observed that a large number of advertisers paused their campaigns following Russia's invasion of Ukraine on February 24. Majority of them however resumed their campaigns within 10 days of the invasion.
The company estimates the revenue growth in the ongoing Q2 quarter to be between 20 percent and 25 percent. Andersen said the impact of the war in Ukraine on input cost, marketing budgets and he overall economic confidence has been significant, making it difficult to predict its impact on a forward-looking basis.
"We are concerned that the operating environment ahead could be even more challenging, leading to further campaign pauses or advertiser budget reductions" he said during the call.
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