Snap Aims To Use Discounts To Entice Advertisers
To boost growth in the second quarter earnings, Snap (SNAP) is reportedly offering discounts to advertisers. First quarter earnings were very bad, causing the stock to crumble, however, some positive aspects make Snap a good investment.
First Quarter Earnings
When Snap reported its first quarter earnings report, it left many mixed messages on the table. It was the first earnings report that the company had put out after its IPO back in March.
For the first quarter, Snap reported a loss of $2.31 per share. The fact that Snap had reported a loss for the quarter was bad enough. It literally missed the expectation that losses would only come in at $1.92 per share. That is a very large gap in losses compared to expectations.
Not even the revenue for the quarter could be a savior for the company. Revenue for the quarter came in at $149.65 million, while analysts were expecting to see $157.98 million. Missing expectations for earnings was bad enough; it even struggled on the user growth front. With advertising being an important part of the business, Snap needs to see a lot of user growth.
Advertisers will only want to put ads on social media platforms that show user growth. Well, the bad news for Snap is that user growth had declined. The daily active users or DAUs reached 2 million below 168 million.
Growth
Despite some negatives with respect to Snap, there are a few positives. For starters, the young company has seen some explosive growth year over year. For example, in the fourth quarter of 2016 it reported revenue of $165.68 million. In the fourth quarter of 2015, the prior year, revenue only stood at a total of $32.72 million.
That is an explosive growth in revenue, especially if you consider all the competing social medial platforms out there today. Secondly, Snap is expanding itself into other areas to keep up with other social media platforms. For instance, it is spending cash on creating original content for its app.
Snapchat’s first original show, known as “Good Luck America”, is seeing a 53% boost in the amount of viewers in its second season. It is seeing some 5.2 million views per episode. Like other social media platforms, Snap intends to broadcast up to 20 new shows each week. That push to add new content, might help the company in the long run.
Incentives for Growth
To help boast revenue Snapchat is offering incentives to advertises in the form of discounts and coupons. Such a tactic might help advertisers branch away from competitors like Google, or Facebook.
The truth is that Snap is hurting compared to its major competitors. Analysts think that the move is a good idea, because it might be enough to help boost its earnings in the upcoming second quarter report.
What Binary Options Traders Should Watch For
Traders should watch a few things.
The first of which is to see if using discounts or bonuses will be enough to bring new advertisers to Snap’s platform. While the gesture seems like it might work, there is a possibility that it could backfire.
The second item would be second quarter earnings report. It will be important to see if the metrics from the first quarter can shift to a better outcome in the second quarter. While Snap is likely going to report another loss on its earnings per share, revenue growth will be very important for the company going forward.
The final item that traders should keep an eye on would be the positives that the company has going for itself. The massive growth in revenue from 2015 to 2016 paints a positive picture. It will be important to see if this trend continues to the fourth quarter of 2017.
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