Q3 2024 Snap Inc Earnings Call
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Ladies and gentlemen, please remain holding the conference call will begin shortly.
Speaker Change: Again, please remain holding your conference call will begin shortly.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Good afternoon, everyone.
Speaker Change: Welcome to snap Inc's third quarter 2024 earnings conference call.
Speaker Change: At this time participants are in a listen only mode.
Speaker Change: I would now like to turn the call over to David Ohmmeter head of Investor Relations.
David Ohmmeter: Thank you and good afternoon, everyone.
Welcome to snaps third quarter 2024 earnings conference call.
Speaker Change: With us today are Evan Spiegel, Chief Executive Officer, and co founder and Derek Anderson Chief Financial Officer.
Speaker Change: Please refer to our Investor relations website at Investor Dot snap Dot com to find today's press release earnings slides and Investor letter.
Speaker Change: This conference call includes forward looking statements, which are based on our assumptions as of today.
Speaker Change: Actual results may differ materially from those expressed in these forward looking statements and we make no obligation to update our disclosures.
Speaker Change: For more information about factors that may cause actual results to differ materially from these forward looking statements. Please.
Speaker Change: Please refer to the press release, we issued today as well as risks described in our most recent Form 10-K or Form 10-Q, particularly in the section titled risk factors.
Speaker Change: Today's call will include both GAAP and non-GAAP measures.
Speaker Change: Reconciliations between the two can be found in today's press release.
Speaker Change: Please note that when we discuss all of our expense figures, they will exclude stock based compensation and related payroll taxes, as well as depreciation and amortization and certain other items.
Speaker Change: Please refer to our filings with the SEC to understand how we calculate any of the metrics discussed on today's call.
With that I'd like to turn the call over to Evan.
Hi, everyone and thank you for joining our call in Q3, we continued to make progress on our core priorities of growing our community and improving depth of engagement driving topline revenue growth and diversifying our revenue sources and building toward our long term vision for augmented reality.
Speaker Change: Daily active users reached $443 million in Q3, an increase of $37 million year over year, we continued to deepen engagement with our content platform with a number of content viewers and total time spent watching content growing year over year.
Speaker Change: <unk>, we have made with our direct response advertising business and the growth of our snapshot plus subscription business contributed to total revenue, increasing 15% year over year to $1 $37 billion.
Speaker Change: We continue to make meaningful progress with our lower funnel Dr business as total active advertisers more than doubled year over year in Q3, and an effort to grow our lower funnel GR business faster, we are innovating on our advertising products investing in machine learning and evolving the way we go to market to better serve our advertising partners.
We hosted our annual snap partner summit in Q3, bringing together partners creators in lung developers to introduce a number of new initiatives, we announced a new and simplified version of Snapchat that we believe will further our initiatives to grow our community and deepen engagement.
Speaker Change: We also announced two new AD placements sponsored snaps and promoted places that will provide incremental reach to our advertising partners as they engage with snap chatters across our service.
Speaker Change: To further our vision for augmented reality computing, we launched the fifth generation of spectacles are AR glasses powered by snap OS and introduced a series of generative AI innovations for our developer platform developers are already building amazing lenses, and we can't wait to see the new experiences they create for our community.
Speaker Change: We believe the rapid pace of innovation set by our team demonstrates the impact of a leaner organizational structure that is more focused on our core strategic priorities.
Speaker Change: The benefits of our more focused set of priorities is also evident in our financial results, where we have cleared a path to generate meaningful adjusted EBITDA profitability and positive free cash flow both of which are critical stepping stones to future GAAP profitability in Q3, specifically the combination of top line progress and expense discipline translated to 100.
Speaker Change: $32 million of adjusted EBITDA and $72 million of free cash flow.
Speaker Change: Moving forward, we will continue to calibrate our investments carefully to build on our top line momentum, while realizing the operating leverage necessary to drive improved financial performance.
Speaker Change: In Q3, we introduced a new and simplified version of Snapchat organized into three core experiences focus on communicating with friends using the camera and watching entertaining content for snap Chatters. This updated layout offers a more personal relevant and easy to use interface for creators simple snapshot amongst greater discovery and enhances the ability.
Speaker Change: For content to reach new audiences.
Speaker Change: Currently there are approximately 10 million snap chatters using simple snapshot across dozens of countries.
Speaker Change: Broadly speaking simple sample that is driving the greatest content engagement gains among more casual users, which is an important inputs of community growth and advertising inventory, we are seeing particularly positive impacts on Android devices, including increased time spent with content increase story views and more replies to friends' stories, which is an important conversation starter that helps <unk>.
Speaker Change: Or close relationships. We are also seeing an increase in constant active days on iOS, but the impacts to other top engagement metrics are not yet is broadly positive as on Android due in part to the differences in engagement across these platforms. We are encouraged by this early progress as it reinforces our conviction that this user experience will further our goals of inspire and create.
Speaker Change: <unk> enhancing communication and delivering a more engaging content experience, we recognize that any significant change in user experience brings risk of disruption to our community and advertising business further the impact on engagement may vary as we expand our testing some new cohorts as a result, we will be intently focused on testing and iterating in the months.
Speaker Change: To optimize the experience for our community and our business.
We continue to make meaningful progress in growing our global community, reaching 443 million daily active users in Q3, an increase of $11 million quarter over quarter daily active users in North America was $100 million approximately flat year over year, but up quarter over quarter as our initiatives to increase user engagement begin to show early signs of progress.
Speaker Change: Daily active users in Europe was $99 million compared to $97 million in the prior quarter and $95 million in the prior year.
<unk> and rest of world was $244 million compared to $235 million in the prior quarter and $211 million in the prior year.
Speaker Change: Snapping with friends and family is the core of our service and the primary driver of the continued growth and long term retention of our global community.
In Q3, we introduced new AI enabled features to inspire creations spark conversations and help our communities strengthen their relationships through snapping.
Speaker Change: For example, we introduced AI and Snapchat memories, which enables <unk> to share AI generated collages and video mash ups with friends. In addition, we announced an expanded strategic partnership with Google cloud to leverage the multimodal capabilities of Gemini on vertex AI to power snapping with my on our AI powered chatbot in Q3, the number of Snap Center.
Speaker Change: In the U S more than tripled quarter over quarter.
Speaker Change: Our content platform continues to strengthen relationships on snapchat with the number of people sharing spotlight content with friends up more than 60% year over year in Q3 to further deepen content engagement, we are investing in our ml models to improve ranking and personalization.
Speaker Change: In Q3, we enhanced our spotlight recommendation system to better represent each snap chatters interests and preferences based on historical signals launched models optimized for new snap Chatters and deployed multimodal ml models to improve recognition of video text and audio and content submitted by creators.
Speaker Change: To expand our content supply we are focused on growing our creator community by supporting them with content creation tools and monetization opportunities.
Speaker Change: In Q3, we began testing a new AI video generation tool that enables creators to generate engaging videos with a simple text or image problems.
Our efforts to support creators have contributed to the number of creators posting content growing approximately 50% year over year in Q3. The combined impact of these initiatives have helped to drive improvements in global time spent watching content, which increased 25% year over year and 6% quarter over quarter in Q3 in North America time spent watching content was.
Speaker Change: Relatively stable down 1% year over year, while increasing 2% quarter over quarter, the relatively higher rate of growth outside North America is due in parts of the greater mix of content viewing being driven by spotlight in these regions as spotlight reach and depth of engagement continues to grow rapidly across all regions.
Speaker Change: Doug mentioned reality continues to inspire creation and drive engagement on Snapchat more than 375000 creators developers and teams from nearly every country in the world have built over 4 million lenses. For example, our past and future me Islands, which enabled snapshot to transform into their younger and older cells was viewed over $650 million.
Speaker Change: In Q3 to build on this momentum we created a number of generative AI capabilities inland studio, including easy lens, our new Gen. AI tool that makes it possible to create an experience within minutes. We are also rolling out a slate of new Gen. AI suite features and lens studio, including new animation tools that automatically blend different animations together.
Speaker Change: Her to easily generate full <unk> characters.
The response to our new tools and lens studio has been inspiring and reinforces our belief that long term success requires.
Speaker Change: Requires a vibrant developer and creator ecosystem.
Speaker Change: We believe our efforts to build a global air ecosystem are critical to enabling new experiences brought to life through spectacles. In Q3, we introduced the fifth generation of spectacles are see through Standalone AR glasses that enable developers to use <unk> lenses and experienced the world together with friends in new ways spectacles are powered by snap.
Speaker Change: Our new operating system designed to reflect how people naturally interact with their hands and voice spectacles enable developers to create immersive VR experiences interact with my I browse the internet or lay out multiple screens to get work done anywhere.
Speaker Change: Developers and partners are already creating experiences for spectacles, including <unk> by the Lego group and paradigm, a friendly and unique pet from <unk>, we aspire to be the most developer friendly platform in the world and we are excited to offer our new generation of spectacles to developers as an invitation and inspiration to.
Speaker Change: Create new experiences.
Speaker Change: Looking ahead, we are focused on innovating and enhancing our core product experience, while continuing to invest in the future of augments reality. We believe continued progress on these initiatives is a critical input to serving our community and expanding our long term monetization opportunity.
Speaker Change: We continue to make progress on three foundational advertising platform initiatives, including better and larger ml models improves privacy safe signals and more performance AD formats in order to deliver improved campaign performance for our advertising partners.
Speaker Change: The expansion of seven zero optimization to App install in App purchases driving better performance for advertisers with early results showing cost per install decreasing 24% and cost per purchase decreasing 27% compared to 28, one optimization for example, <unk> and international game Development Company and creator of hit title Hero Award.
Speaker Change: <unk> leveraged seven zero optimization for App install in App purchase and saw a 19% increase in installs with an 18% lower cost per install in a 56% increase in purchases at a 36% lower cost per purchase.
Speaker Change: Recently, we introduced our new landing page view optimization goal to help advertisers drive high quality traffic to their websites through improvements in our ml models that optimized for the specific objectives, we observed lower costs for some advertisers versus traditional click engagement models.
Speaker Change: For example, with the guidance of their digital agency to annuity Wrangler leverage landing page view optimization and saw a 34% increase in CPM efficiency and a 380% increase in conversions, leading to a 212% higher Roe as compared to previous benchmarks.
Speaker Change: The combination of more performance Dr products go to market operations optimized for SMB customers, an easier onboarding and integration tools are helping to rapidly expand our SMB customer base.
Speaker Change: As a result of these efforts total active advertisers more than doubled year over year in Q3 today with our snap promote offering smbs and creators alike can promote their services content our products reach new audiences and measure AD performance all within Snapchat on their mobile devices. We also continue to enhance the advertiser onboarding experience.
Speaker Change: Personalizing and automating the buying process from end to end, so that smbs can optimize their campaigns faster and enhanced performance.
Recently, we launched automated in flight campaign recommendations adaptive templates for campaign setup and scaled creative editing to further improve our go to market strategy for Smbs for example, U S based cookie franchise crumble leveraged our new seven zero optimization for App install and App purchase and completed their Kathy integration, resulting in.
Speaker Change: At 32% quarter over quarter increase in <unk>, and a 242% quarter over quarter increase in purchases.
We are also focused on re accelerating upper funnel brand revenue growth by delivering innovative and performance advertising products, while supporting brands and agencies with resources and unique insights in Q3, we launched first lens unlimited, which offers advertisers the first impression of today and the first slot of their lens carousel, allowing them to reach our community.
Speaker Change: At greater scale.
Speaker Change: During testing first lens unlimited drove an average increase of over 35% in incremental impressions for advertising partners.
Speaker Change: We also launched state specific first story, which allows U S advertisers to target first story takeover campaigns to individual states where to reach the entire country with different creative for each state.
Speaker Change: We are also experimenting with two new AD placements sponsored snaps and promoted places importantly, both of these placements are designed to leverage our existing full screen vertical video snap AD format. So that advertisers can automate placement across our service without having to develop bespoke creative.
Speaker Change: Sponsored SaaS will empower advertisers to communicate visually with the Snapchat community, making the core functionality of snapshot accessible to advertisers <unk>.
Speaker Change: Promoted places enables businesses to use the snap map to suggest sponsored placement of interest to snap chatters sponsor snaps and promoted places will help businesses reach snap chatters and engaging ways across our differentiated service and we believe these new AD placements will contribute meaningful incremental advertising inventory over time, we are on track to launch sponsored Sampson promoted places.
Speaker Change: In certain geographies in Q4.
Speaker Change: With that I'd like to turn the call over to Derek to discuss our financial results.
Derek Anderson: Thanks, Kevin.
Derek Anderson: In Q3 total revenue was $1 $3 7 billion.
Derek Anderson: Up 15% year over year, and 11% quarter over quarter.
Derek Anderson: Advertising revenue was $1 5 billion up 10% year over year, driven primarily by growth from Dr advertising revenue, which increased 16% year over year.
Derek Anderson: Dr AD revenue growth was driven by continued strong demand for our seven zero pixel purchase optimization, there was up more than 160% year over year.
Derek Anderson: As well as a growing contribution from App purchase optimization.
Derek Anderson: Brand oriented advertising revenue was down 1% year over year as we continued to see weak demand from certain consumer discretionary verticals, including technology Entertainment and retail.
We continue to make progress toward diversifying our revenue sources with other revenue more than doubling year over year to reach $123 million in Q3.
Other revenue includes all non advertising revenue the majority of which is snapchat, plus subscription revenue and Snapchat plus subscribers more than doubled year over year to exceed $12 million in Q3.
Derek Anderson: In Q3, North America revenue grew 9% year over year with a relatively lower rate of growth in this region due to the impact of weaker brand oriented demand being relatively concentrated in North America.
Derek Anderson: Europe revenue grew 24% year over year as continued progress on our <unk> platform fully offset the impact of more challenging prior year comparisons.
Derek Anderson: Rest of World revenue grew 32% year over year, driven by the continued progress with our <unk> platform.
Derek Anderson: Global impression volume grew at approximately 19% year over year, driven in large part by expanded advertising delivery within spotlight and creator stories.
Derek Anderson: <unk> were down approximately 7% year over year inventory growth exceeded advertising demand growth in Q3.
Derek Anderson: Adjusted cost of revenue was $637 million in Q3 up 16% year over year infrastructure costs were the largest driver of the year over year increase due in large part to the ramp in ml and AI investments over the past year.
Derek Anderson: The infrastructure cost per <unk> was <unk> 84 in Q3, which is up from 81 in the prior quarter and within our expected range of 83 to 85.
Derek Anderson: The remaining components of adjusted cost of revenue were $263 million in Q3, or 19% of revenue, which is in line with the prior quarter and at the lower end of our full year cost structure guidance range of 19% to 21%.
Derek Anderson: Adjusted gross margin was relatively stable at 54% in Q3 up from 53% in the prior quarter, but in line with 54% in the prior year.
Derek Anderson: Adjusted operating expenses were $604 million in Q3 up 1% year over year personnel costs decreased 9% year over year, driven by an 11% year over year decline in full time head count.
Derek Anderson: This was partially offset by higher marketing costs related to our ongoing more snapchat campaign as well as the impact of our snap partner summit, which incurred in Q3 this year compared to Q2 in the prior year.
Derek Anderson: Increases in legal related costs year over year, including the impact of complying with an increasingly complex global regulatory environment were also a key factor in offsetting lower personnel costs in Q3.
Derek Anderson: Adjusted EBITDA was $132 million in Q3 up from $40 million in Q3 of the prior year, reflecting higher revenue and operating expense discipline.
Adjusted EBITDA flow through or the share of incremental year over year revenue that flowed through to adjusted EBITDA was 50% in Q3 as we continue to carefully prioritize our investments to drive top line growth and deliver improved financial performance.
Derek Anderson: Net loss was $153 million in Q3.
Derek Anderson: Compared to a net loss of $368 million in Q3 of the prior year.
Derek Anderson: The $215 million or 58% improvement in net loss year over year, largely reflects the flow through of a $92 million improvement in adjusted EBITDA.
Derek Anderson: A $94 million or 26% reduction in stock based compensation and related expenses and the impact of $19 million of restructuring costs in the prior year.
Derek Anderson: The reduction in SBC to $266 million in the current quarter reflects reduced head count and the diminished impact of refresh equity grants relative to the prior year.
Derek Anderson: Free cash flow was $72 million in Q3, while operating cash flow was $116 million.
Derek Anderson: Over the trailing 12 months free cash flow was $147 million in operating cash flow was $347 million as.
Derek Anderson: As we continue to balance investments with top line growth to deliver sustained positive cash flow.
Derek Anderson: Dilution for the year over year growth in our share count was 0.6% in Q3 down from one 9% in the prior quarter.
We ended Q3 with $3 2 billion in cash and marketable securities on hand, and no debt maturing in the current year.
Derek Anderson: Which reflects our ongoing commitment to maintaining a conservative balance sheet with ample liquidity for our operations.
Derek Anderson: As we entered Q4, we anticipate continued growth of our global community and our Q4 guidance is built on the assumption that <unk> will be approximately $451 million in Q4.
Derek Anderson: We are excited about the potential for simple Snapchat sponsored snaps and promoted places to contribute to top line growth over time.
Derek Anderson: In particular, we are encouraged by early testing results that show content engagement gains among less frequently engaged users of snapshot as we believe this can be an important input to impression growth and incremental reach for advertisers.
Derek Anderson: While we believe growth in content engagement and demand for the new AD placements may build over time many of the changes associated with simple snapchat occur immediately at snap chatters transition to the new user experience, which presents the risk of near term disruption, while we do not currently anticipate a broad role.
Derek Anderson: At a simple snapshot of our most highly monetized markets until Q1 at the earliest.
Derek Anderson: We have now begun limited testing in these markets and May further expand this testing as we move through Q4.
Derek Anderson: In addition, upper funnel advertising from large enterprise clients has historically been an important component of demand in Q4.
Derek Anderson: And this portion of the business has been underperforming our overall ads business in recent quarters.
Derek Anderson: Given these factors our Q4 guidance range for revenue is 151 billion to $1 $5 6 billion, implying year over year revenue growth of 11% to 15%.
Derek Anderson: From a cost structure perspective, we are tracking well against our full year cost structure guidance.
Derek Anderson: For infrastructure, our guidance was for quarterly cost of 83 to 85 per <unk>.
Derek Anderson: We hit the midpoint of this range in Q3, and with growing ml and AI capacity utilization being partially offset by the benefit of recent pricing improvements.
Derek Anderson: We anticipate being near the top end of this range in Q4.
Derek Anderson: For all other cost of revenue our guidance range was 19% to 21% of revenue. We came in at the low end of this range in Q3 and anticipate being within the range again in Q4.
For adjusted operating expenses, we provided full year guidance of 242 5 billion.
Derek Anderson: 2252 5 billion.
Derek Anderson: In Q3, our annualized run rate was consistent with the low end of this range and with modest sequential growth forecasted for Q4, we expect to be near the low end of the range for the full year.
Derek Anderson: Our FTC and related expenses, we guided for a range of 113 billion to $1 2 billion for the full year in.
Derek Anderson: In Q3, the annualized run rate of our SBC expense was below the low end of this range.
Derek Anderson: We anticipate modest sequential growth in SBC expense in Q4.
Derek Anderson: And therefore anticipate we will come in 4% to 5% below the low end of our guidance range for the full year.
Derek Anderson: Given the revenue range above and the progress we have made to optimize our cost structure, we estimate that adjusted EBITDA will be between $210 million and $260 million in Q4.
Derek Anderson: Given the strength of our balance sheet, our progress towards sustained free cash flow generation and our desire to opportunistically manage our share count for the benefit of our long term shareholders. We have authorized a new share repurchase program and the amount of $500 million.
Derek Anderson: As we move forward, we will remain focused on prioritizing our investments carefully to drive top line growth alongside improved financial performance.
Derek Anderson: Thank you for joining our call today, and we will now take your questions.
Derek Anderson: Thank you.
Speaker Change: I'll now begin the Q&A session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before you press the keys.
Speaker Change: So let's draw your question. Please press Star then two.
Speaker Change: And the answers of time, we ask that you. Please limit yourself to one question after.
Speaker Change: After your initial question is ask your line will be muted.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Our first question today comes from Dan Salmon with New Street Research. Your line is now open.
Dan Salmon: Okay, great good afternoon, everyone.
Dan Salmon: You highlighted the potential risk to perform chapter I understanding your comments, Eric walk through the sort of timing of testing.
Dan Salmon: Both mentioned over a couple of markets I mentioned being.
Dan Salmon: Being cautious on how you're testing into higher monetizing market. So.
Dan Salmon: The high level makes a lot of sense could you maybe take us a layer deeper on how you and the team are monitoring and managing that risk on a regular basis.
Dan Salmon: Including how you're ensuring that you don't see a monetization headwind from the changes.
Dan Salmon: Okay.
Speaker Change: Thanks, Dan.
We are definitely excited about the long term opportunity for simple Snapchat.
Speaker Change: Especially with new and less engaged users where we've seen some of the biggest increases in content engagement, but we definitely have a lot of work to do to iterate and test before we begin a broader rollout. So that will include things like better understanding the shifts in inventory and potential impacts to monetization. For example, we'll be working to move more of the story I deliver.
Speaker Change: And to interstitial placements rather than tile based ads and the current discover feed so certainly changed the scale have the potential to be disruptive, which is why we're taking this test and learn approach and ultimately we really want our community and our partners to benefit from these changes.
Speaker Change: Our next question comes from Rich Greenfield with <unk> partners. Your line is now open.
Speaker Change: Rich your line is now open.
Sorry about that sorry about that just wanted to follow up on simple snapshot. When you think you've started to roll it out in some major markets. This quarter have you done that in the U S U K, France, Germany like some of your Big AD market.
Speaker Change: The reason I ask is obviously the product looks great. It's driving engagement, but I think what we're all trying to understand is are you willing to take some near term disruption revenue wise next year to rollout the superior product or will you wait until it's a revenue neutral shift to wait to roll. It out like we are just trying to understand what will happen.
Speaker Change: To make you roll it out more broadly if that makes sense.
Thanks, Rich Yeah, we're still early in the journey on understanding the monetization dynamics in some of those inventory shifts and how that how that could impact.
Speaker Change: Revenue, we certainly want to take the time to work through those sorts of changes and make sure our advertisers and our partners. For example are prepared for those sorts of changes. So all that to say I think it's pretty early right now and while we are excited about some of the.
Speaker Change: Engagement shifts, we've seen with new and less engaged users, where we're going to take our time to really understand the monetization dynamics.
Speaker Change: Walk through some of those changes so.
Speaker Change: Our goal is really to take our community and our partners along for that journey and so forth.
Speaker Change: We're going to keep testing and learning here.
Speaker Change: And potentially even explore something like a phased rollout for example.
Speaker Change: Over an extended period of time.
Speaker Change: Okay.
Speaker Change: Our next question comes from Justin Post with Bank of America.
Line is now open.
Speaker Change: Great. Thank you I just wanted to ask about <unk>.
Sponsored Snapchat promoted places I know you mentioned Youre pretty excited about the long term opportunity can you help us just understand the usage the services get and how youre thinking about inserting ads and how that could look for you.
Speaker Change: In the very long term thank you.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Thanks, Jess and yes, we're really excited about these two new AD placements that will really be leveraging the foundation, we built for performance advertising over the past couple of years with with really the vision that snap ads can be fungible across many different placements across snapchat that leverage the unique and <unk>.
<unk> ways that our community engagement across our platform I think in the case of promoted places we've gotten some some great early feedback we have run some initial tests, although I think it's a bit too early to share the data there but in general we're just seeing a lot of business is really focused on driving more people in store into their retail.
Speaker Change: Locations to try and strengthen that customer relationship I think many brands are feeling like they've been disinterred.
Speaker Change: This intermediate Ed with their digital relationship with customers and so being able to bring people into their retail establishments establishment and really strengthen that relationship with their customers something that's important to them. So the feedback there has been great and we have some sponsored snap tests forthcoming in the quarter or so.
Speaker Change: Once we have some more data back there will be eager to share that as well.
Speaker Change: Our next question comes from Ken <unk> with Wells Fargo. Your line is now open.
Speaker Change: Thank you appreciate it.
Speaker Change: Wanted to ask when you think about the key objectives for the simplified.
Speaker Change: App launch when do you think about the.
Speaker Change: The opportunities in engagement versus monetization, if you could cut away the two and if theres one that kind of.
Speaker Change: It is more important than the other.
Speaker Change: And the second one is how do you think.
Speaker Change: What will it take to get advertisers to spend more broadly not only always on.
Speaker Change: It's more of a direct response or SME behavior, but but also spend kind of.
Speaker Change: Give you a budget and allow you to allocate across the different products and services on snap.
Speaker Change: We seem to be very successful at both Google and meta. Thank you.
Speaker Change: Yeah. Thanks, Ken I think as we look at the evolution with simple snapshot, our north Star has always been creating the best possible product experience for our community.
Speaker Change: And our product experience that they really love I think there are some challenges today as we've innovated over the years and create all these new ways to engage with Snapchat. The app has become.
Speaker Change: Complex and even basic things like watching stories are watching spotlight or that's something that people have to do in two different screens right now and so being able to unify the content experience I think is something thats going to be a really important step in the right direction for US same goes for our content discovery for example, I think today the tile based content.
Speaker Change: Discovery is just not as effective as full screen content discovery and so I think that's a big opportunity that will not only benefit.
Folks.
Speaker Change: Using snapchat, but also creators who are working really hard to reach our audience.
Speaker Change: With really compelling content. So I think in general this this north star of our community and of course, our partners like creators is really important to US and then what we found is that that over the over the long term tends to create more opportunity for our advertising partners as well as.
Speaker Change: They are able to reach our audience through these different parts of our service. So I think the <unk>.
Speaker Change: North Star is going to be.
Speaker Change: The community engagement and then thinking about how we can best manage this transition so that our advertising partners and our content partners can benefit from it as well.
Speaker Change: Our next question comes from Mark Shmulik with Bernstein. Your line is now open.
Speaker Change: Hi, I'm Luisa speaking on behalf of Mark Shmulik.
Speaker Change: So I have a question we have a question on spotlight engagement is spotlight viewership behavior outside of North America different can you provide some more color on that.
We've seen really strong growth and spotlight engagement globally, I think North America as we shared in the letter we've essentially been offsetting some declines with the stories content engagement, while we've seen growth in spotlight. So I think youre just seeing a.
Speaker Change: Of a mix shift there, but overall the growth of a spotlight on the depth of engagement has been.
Speaker Change: A big driver.
Speaker Change: <unk>, a few times growth for us.
Speaker Change: Okay.
Speaker Change: Our next question comes from James <unk> with Jefferies. Your line is now open.
James <unk>: Great. Thank you for taking the question can you talk about the results that youre seeing from the new app install product and what needs to happen for app install clients to become a more meaningful driver of your top line results.
James <unk>: And then just curious if you can comment on the revenue growth that youre seeing so far in Q4 that helped inform your 11% to 15% guide. Thank you.
Derek Anderson: Hey, James It's Derek speaking thanks for the question on the outside I think.
Derek Anderson: One of the things that we've seen as an ongoing trend is that we sort of walked new optimizations and products through the process of <unk>.
Derek Anderson: Testing with initial existing clients on a limited basis getting to a point, where we can see really good results for those customers and then expanding that and go to market of annualized in those results and driving broader adoption, which tends to then lead to general availability and then eventually a bigger contribution to the actual revenue growth over.
Derek Anderson: Time so.
Derek Anderson: If I look in particular.
Over the over this year and Q3, we saw a purchase.
Derek Anderson: Optimization and start to become a growing contributor to the top line growth. So that's something that would be launched much earlier in the year. It went through that testing phase then expansion and go to market and now is becoming a contributor which is wonderful to see.
Derek Anderson: If we think about app install in App purchase those are things that we extended our seventh year of optimization framework too and we've seen clear performance improvements for advertisers we shared some case studies there.
Derek Anderson: From a metrics point of view for example, we've seen cost per install is down 24% in cost per purchase is down 27%. So those are really exciting results to see for our customers and then give us results that we can evangelize to others. So I think the key here is to keep rolling out the adoption of those expanded testing advantage lies.
Derek Anderson: Those results and case studies to the customer verticals, where we have really good product market fit and continue.
Derek Anderson: Continue to drive that through the elevation there.
Derek Anderson: Execution in our go to market.
Derek Anderson: If we look back further.
Derek Anderson: First optimization on the rebuild of the Dr business that we rolled out well more than a year ago was the seven zero pixel purchase optimization and Thats really one that's gone through the entire evolution of the launch test evangelize and grow and we saw that up 160% year over year in the most recent quarter, so hoping to draw.
Derek Anderson: Five continued results there and build on the momentum that we have with the overall Dr business.
Derek Anderson: Thanks for the question hopefully that helps.
Speaker Change: When we're thinking about the your other question around the guide into Q4.
Speaker Change: And what's informing that obviously Q4 has historically been a pretty backend weighted quarter end So limited.
Speaker Change: To read through to the back half is always challenging I think one of the things. We're focused on is the momentum that we're seeing in different parts of the business. So I just talked a lot about the Dr. Business. We're focused on continued execution and their continued cafe adoption continued rollout of the App optimizations and client performance on the brand side, we're not expecting any cigna.
Speaker Change: Again recovery there, we've been down 1% year over year in each of the last two quarters not anticipating a major shift there as we go into Q4, and obviously, that's an important component of revenue in the final quarter of the year.
Speaker Change: Our product execution is the key that were focused on there in terms of igniting growth long term. So you didn't see us rollout some product optimizations. The most recent quarter and clothing first lens unlimited, which allows our.
Speaker Change: Advertisers to reach folks with the first impression of the day in the first one the lens care. So that seeing some really nice early results drove 30%, 35% actual increase in incremental impressions and we also launched.
Speaker Change: The state specific first story.
Speaker Change: Product that allows advertisers to target individual creative to specific states or to <unk>.
Speaker Change: The entire country with different creative for different states. So there's a lot of product innovation going in there and that's the key to improving that growth over the longer term, but not expecting a big improvement on the brand side in particular in Q4. So those are some of the dynamics we're seeing.
Speaker Change: Alongside the very limited testing of simple snapshot that are informing a range there and hopefully that gives you a little color.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Slater Progeria with Wolfe Research. Your line is now open.
Speaker Change: Thank you so much for taking my question.
Speaker Change: Yes.
Speaker Change: Regarding topline growth so when you think about.
Speaker Change: <unk> revenue growth and excluding I guess, snapchat, plus subscriptions with the advertising growth.
Speaker Change: What gives you the most confidence in your ability to deliver faster than overall digital AD market growth. When you have a lot of product initiatives going on.
<unk> integration ongoing with App optimizations and then.
Speaker Change: <unk> that you had.
Speaker Change: Do you and your partner summit and that includes sample snapshot in sponsorships and.
Speaker Change: Promoted places, even if that takes a little bit longer in your mind for monetization, but could you help us think through how what gives you confidence as you think about maybe near to midterm in terms of AD revenue growth. Thank you.
Derek Anderson: Hi, there it's Derek speaking I think the answer here is multi layered to start I think over the long term.
Derek Anderson: We are most focused on the execution of the direct response business and specifically the lower funnel Dr business in terms of rolling our product optimizations and then on top of that we're very focused on growing our small and medium size customer segment, and making sure that we build on the momentum there. So.
Derek Anderson: Talk through each one of those I'd say, there's a multi layered approach here, where we're executing against a number of different initiatives to to be able to drive that sustained and higher rate of growth on that those components of the business. So specifically first is the continued ongoing build out of the ml and AI.
Derek Anderson: At the company that feeds into our better our ability to have better personalization and recommendation of ads getting the right out in front of the right person, we continue to make progress on having more signals.
Derek Anderson: Coming into the platform and harvesting more of the privacy safety signals that exists on platform getting more of that harnessed into much larger models and our ability to refresh those more frequently.
Derek Anderson: Then you can see the steady drumbeat of us delivering rolling out and then optimizing new.
Derek Anderson: Goals for advertisers, we talked earlier about the really strong growth, we're seeing seven zero pixel purchase how we rolled that out and extended that framework to some of the app objectives, and how that is starting to deliver growth.
Derek Anderson: And then go to market efforts.
Derek Anderson: All in all client sizes.
Derek Anderson: To basically deliver those optimizations to folks where we have great product market fit one of the muscles that we're really learning to build here is go to market on FMC and Theres a lot of learnings there and a lot of work to do and so for example, we have a number one Ben.
Derek Anderson: <unk> been able to rollout snap promote is a great way for advertisers to get started with just a couple of clicks right in the app. So the lowest friction way to get started.
Derek Anderson: Also for folks using our manager and made it a lot easier for them to very quickly onboard there get started with automated recommendations for campaigns and set up an optimization and then we're getting very good at integration partners. There that are helping us not only drive direct.
Derek Anderson: We've made it much easier to do direct integrations with copy, but then we've got a long and extending list of integration partners that are making it much easier for small and medium sized customers to adopt copy and get started with that feeding their performance with better signals that feedback loop. So.
Derek Anderson: There's a lot of work to be done here and I think the sort.
Derek Anderson: The simplest answer to your question is.
Derek Anderson: The roadmap here is very clear we have a lot of work to do and a lot of things to execute against we have a very clear idea of what we need to do and the team's pace of execution has been very solid.
Derek Anderson: And so the focus now is just to continue to execute that roadmap deliver for our customers and drive the results.
Derek Anderson: Hopefully that helps a little bit there.
Speaker Change: Our last question comes from Ross Sandler with Barclays. Your line is now open.
Ross Sandler: Great. Thanks for squeezing me in.
Ross Sandler: And then a question on the spectacles.
Ross Sandler: <unk> was pretty insane.
Ross Sandler: At the partner summit compared to.
Ross Sandler: Once some of US have tried out prior versions of that product. So I guess the <unk>.
Ross Sandler: As you know.
Speaker Change: What level of investment and what pace.
Speaker Change: Or timing of.
Speaker Change: That could be a consumer product or are you expecting and then related to that now that we've seen what Matt is doing with Orion.
Speaker Change: How does that impact both the investment level and the pace by which you are going to.
Get that market to the consumer.
Speaker Change: You will get the product to the consumer.
Speaker Change: Perhaps quicker than than before or not just your thoughts on that would be great.
Speaker Change: Okay.
Speaker Change: Thanks, Ross Yeah, we're really excited about the progress, we're making with respect to call. It has been really exciting to share that fifth generation with so many of our partners and developers I think.
Speaker Change: Now, we're just really focused on helping people build amazing lenses for spectacles I think one of the challenges that any new computing platform sort of basis as this chicken and egg problem of people really needing and archives new lens experiences to use when they first buy.
Speaker Change: By our glasses, and so by focusing on really seeding and supporting that developer ecosystem and making sure that our amazing lenses for people to use when they buy the consumer product I think we're really focused on the key problem, we need to solve in advance of a widespread consumer adoption. So we're going to stay focused there for now it's been so.
Speaker Change: Exciting to see the amazing ones that people have already built.
Speaker Change: In the weeks since since launch and we think there's just a huge opportunity to transform the way people use computing grounded in the real world and together with their friends and leveraging.
Speaker Change: Natural interactions and this is a vision we've been working towards.
Speaker Change: For over a decade.
Speaker Change: Now and so we have some very unique assets to leverage like lens studio, which helps people build these really complex.
Speaker Change: Our experience says and then run them in a really perform it weigh on lens core that power is not just the snapchat application, but also our spectacles.
Speaker Change: Glasses, so that alongside all of our investments in hardware and the progress. We've made just makes me really excited about where we are now and of course the potential to get this into customers hands. So we're going to stay focused on our strategy and keep executing we're really excited to share more with you soon.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: This concludes our Q&A session as well as Snap Inc. 's third quarter 2024 earnings conference call. Thank.
Speaker Change: Thank you for attending today's session you may now disconnect.