Snap Drops a Bombshell Filter

Snap Drops a Bombshell Filter


What do you call Gen-Z smartphone users in the Western world? Snapchat addicts, obviously.

They are apparently not alone. On Tuesday, Snapchat parent

Snap Inc.


SNAP 11.10%

hosted its first-ever investor day, which proved to be a hit. Its shares opened the day down more than 20% amid a broad tech selloff but later rallied to finish up more than 11%.

While investors expected Snap to detail its monetization efforts around key innovations like augmented reality and its Snap Map, the company surprised Wall Street with one compelling detail: shares began to fly after Snap’s director of product Peter Sellis teased that, thanks to the company’s self-service ad platform, it is in a position to deliver multiple years of 50%-plus revenue growth. That is significantly higher than the average 35.5% growth analysts are forecasting Snap will deliver over the next five years, according to FactSet. It may be just enough to help propel Snap’s stock sustainably higher, even after its shares have more than quadrupled over the past year.

Advertisers, of course, want to be where today’s money is. Snap said on Tuesday that the “Snapchat generation” makes up 40% of global consumers, noting that 80% of its reach is above 18 years old. Snapchat says it now reaches more than 70% of 13 to 24-year-olds in countries that generate more than half of the world’s digital ad spend.

Snapchat’s overall user base still pales in comparison to

Facebook

or Instagram’s, but the good news for advertisers is that those who use the app do so often. Snap has said users open its app an eye-popping average of 30 times a day. Further, early data shows Snapchat’s new technology meaningfully increases an advertiser’s chance of conversion. The company said on Tuesday that those who have used its beta-testing augmented reality technology to try on products have been 2.4 times more likely to click to purchase than average. Validating analysts’ bullish estimates, Snap said it believes its map and camera both represent multibillion-dollar opportunities for the company over the long-term.

Snap’s camera is certainly an of-the-moment differentiator from its competitors. While other social media apps like Facebook open to a newsfeed, Snap opens to its camera, which it believes engenders more of a feel-good environment for its users. That is likely to have played a role in Snap’s 46% annual revenue growth last year amid a tough economic environment riddled with news controversy.

Meanwhile, Snap says the current surge in usage on its platform—even if it proves temporary—can still help to meaningfully improve its technology. The company made a point of noting lenses that might seem juvenile—like a vomiting rainbow or dancing hot dog—have hidden value as each use adds data to enhance its AR algorithms.

While Facebook has shown it pays to be big, Snap is working to prove it pays to be young.

Write to Laura Forman at [email protected]

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