Snap, the parent company of ephemeral messaging app Snapchat, grew its number of daily users and raked in more revenue than expected in the third quarter as more people turned to the platform to stay in touch with family and friends during the coronavirus pandemic.
Snapchat had 249 million users who logged in to the app daily in the third quarter, up 18% compared to the same period last year.
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“Our focus on delivering value for our community and advertising partners is yielding positive results during this challenging time. We’re excited about the growth of our business in Q3 as we continue to make long-term investments in our future,” said Evan Spiegel, Snap’s CEO, in a statement on Tuesday. “The adoption of augmented reality is happening faster than we had previously anticipated, and we are working together as a team to execute on the many opportunities in front of us.”
Snap has fueled the popularity of augmented reality with camera filters that allow users to transform into an anime character, change their hair color or incorporate other effects to their selfies. It’s also been releasing features that let users add AR effects to local buildings and landmarks. One effect, for example, makes it seem like the Capitol building is shooting confetti. Another feature called City Painter that was released in London lets users create virtual art around the city.
Snapchat, though, also faces competition including from Facebook-owned Instagram and short-form video app TikTok. This month, Snapchat launched a feature called Sounds that allows iPhone users to add music to their photos and videos. The company is testing a way for users to add their own sounds to their snaps. Snap has also been investing in original shows in addition to augmented reality.
From July to September, Snap generated $679 million in revenue, beating Wall Street’s forecast of $556 million. The company reported a net loss of $200 million in the third quarter.
The company lost 14 cents per share, which is better than the loss of 18 cents per share analysts surveyed by Thomson Reuters expected. Excluding certain expenses, Snap lost 1 cent per share, beating the loss of 5 cents per share anticipated.
Snap’s stock is currently up more than 18% at $33.81 per share in after-hours trading.
eMarketer Principal Analyst Debra Aho Williamson said in a statement that Snap offers businesses unique advertisements, such as augmented reality ads and commercials in video shows. Analysts, though, are expecting user growth to slow down as the pandemic continues.
“The initial phases of the pandemic drove increased engagement among existing social media users and caused a small number of new users to join social media properties,” she said. “But as the pandemic has worn on, this ‘pandemic bump’ has abated, and growth in the number of new users for Snapchat (as well as for most other social platforms) is slowing.”