Snap Q2 Earnings: The AR Angle
Snap continues to solidify its leading position in consumer AR. After announcing several milestones at its partner summit, including new AR glasses, its Q2 earnings last week signaled continued momentum. In fact, AR was a bright spot in a record-breaking quarter.
Among other lens-based updates, more than 200 million Snapchat users engaged with AR daily in Q2. As we examined earlier this week, it has the highest percentage of its overall user base that’s engaged with AR. Its “cartoon” lens alone achieved 2.8 billion impressions in its first week.
Panning back to overall results, Snap brought in $892 million in Q2 revenue, up 116 percent year-over-year. It’s up to 293 million daily active users, up 23 percent from 238 million in Q2 2020. Net losses narrowed to $152 million, down 53 percent from $326 million in Q2 2020.
Back to AR milestones, there were several tidbits peppered throughout Snap’s earnings call. To synthesize this for AR Insider readers, we’ve parsed and pulled all the AR-related data and comments for this week’s Trendline article. See the breakdown below.
Figures & Features
Diving in, here’s the quick-hit list of AR-nuggets from Snap’s Q2 earnings.
Figures
–– More than 200 million daily active users engage with AR every day on average.
–– Snapchat’s AI-powered ‘Cartoon’ Lens generated 2.8 billion impressions in its first week.
–– More than 200,000 creators use Lens Studio to build AR Lenses.
–– Snap’s Goal-Based Bidding Click optimization for AR drove 49 percent of Snap customer leads in Q2 and was the most effective ad unit for driving traffic to advertisers.
Features
–– Snap released Lens Studio 4.0 at its Partner Summit in May.
–– New AR features include visual classification, multi-person 3D body mesh, advanced cloth simulation, and TrueSize technology for eyewear try-on.
–– Lens Studio 4.0’s new visual effects editor lets creators build advanced Lenses without writing code.
–– Connected lenses enable real-time shared experiences in AR, such as building a virtual LEGO model with remote friends.
–– Snap’s visual search tool, Scan, has been updated with visual recognition capabilities and new front & center positioning on Snapchat’s main camera screen.
Select Earnings Call Quotes
CEO Evan Spiegel
We are continuing to create value for businesses by reimagining the shopping experience through AR. By leveraging the long-term investments we’ve made in augmented reality and personalization, we are laying the groundwork for an improved online shopping experience. For example, we are making it easier to discover new fashion items through Scan by helping Snapchatters scan a friend’s outfit, or a saved photo or screenshot, to shop similar looks and recommendations.
When it comes to purchases and returns, we believe that helping people find the right size and improving the try-on experience could both increase conversion rates for purchases, as well as reduce the rate of returns for online shopping. We are excited about this opportunity because returned goods cost businesses hundreds of billions of dollars each year, and have a large environmental impact. We are pleased with our early progress in this space, and look forward to experimenting and learning more with our retail and e-commerce partners.
We are also collaborating with a variety of partners to power AR experiences in their own applications with Camera Kit, which brings the power of the Snapchat camera to partner applications using our SDK. This quarter, we rolled out a number of Camera Kit partnerships worldwide, including with Walt Disney World. We’ll commemorate their 50th anniversary with an AR experience where visitors can place their own picture on Cinderella’s Castle to create a virtual mosaic of shared moments, as well as access exclusive AR Lenses with Disney characters through the My Disney Experience app. We also partnered with Bumble and Viber to bring Lenses to their respective mobile apps, and are working with Google to bring our Lenses directly to the new JioPhone in India with a native camera integration.
We announced our next generation of Spectacles at our Partner Summit, which are available exclusively for creators. They are our first device with a built-in 3D augmented reality display, and represent another step forward toward our goal of overlaying computing on the world. We are investing heavily in augmented reality across Snapchat, Camera Kit, and Spectacles, and we are excited to continue learning and making progress toward our long-term vision…
…And then as it comes to augmented reality, we’re really excited about the potential for AR, mostly because it makes computing much more human. It’s overlaid on the world around you. You don’t have to look down at a tiny screen. You can look up and be immersed in a computing experience. But that said, I don’t think it’s a replacement at all for existing computing devices, which frankly are much more oriented around information retrieval and information organization. So — and I think what we’re going to see instead is augmented reality is much more oriented around human experiences.
And so whether that’s — more recently, we did a partnership with LACMA to create new monuments in Los Angeles or learning about the world and walking through the solar system to see what it looks like. I mean, of course, many of the other ones as we referenced earlier around e-commerce and try-on, I think augmented reality can provide a totally new way to interact with computing that is experiential and very different than the way that we interact with computing today. So I don’t think it will be a replacement, but I certainly think it’s an exciting way to experience the world and that’s why we’re investing so heavily. Of course, in the near term, on smartphone augmented reality, but then in the longer term as well with wearable AR, which is something we’re really excited about.
Chief Business Officer Jeremi Gorman
We are fully focused on making progress against our revenue and ARPU opportunities, which we believe will be driven by three key priorities. First, driving ROI through measurement, ranking, and optimization. Second, investing in our sales and marketing functions by continuing to train, hire, and build for scale. And third, building innovative ad experiences around video and augmented reality, with a focus on shopping and commerce…
…Augmented reality advertising is delivering a return on investment that is measurable and repeatable, which is encouraging more and more businesses to invest in AR. For example, Smile Direct Club leveraged our Goal-Based Bidding Click optimization for AR, which drove 49% of Snap customer leads in Q2 and was the most effective ad unit at driving traffic for their business compared to other social channels. The success of the Lens ultimately encouraged Smile Direct Club to include AR Lenses as part of their long-term business strategy. We are doubling down on our efforts to help advertisers improve conversions and ROI, and recently launched our GBB Purchase optimization for AR, which allows advertisers to optimize their AR campaigns for down-funnel purchases and fits well into our shopping strategy.
We continue to roll out a number of products and features to help empower AR commerce on Snapchat. We recently launched Public Profiles for all businesses, which give businesses of all sizes a free, permanent home on Snapchat where they can highlight engaging content, showcase compelling AR experiences even after a campaign is finished, and share shoppable products directly within the app. Public Profiles allow brands to build a direct relationship with our community, and we are already seeing some of the largest brands investing in their Profile. For example, Nike leveraged our AR Lenses as part of its Play New campaign to encourage Snapchatters to get active, and the company is planning to build additional Lenses for its Public Profile.
In addition, at our Partner Summit in May we launched unique new try-on capabilities, such as wrist tracking technology for watches and jewelry, and TrueSize technology for eyewear, which complement our existing foot tracking technology, and are all designed to give Snapchatters more confidence in the ability for AR try-on to emulate a physical shopping experience. For example, watchmaker Piaget is using wrist tracking technology to make it possible to try on a variety of different timepieces, and businesses like Zenni Optical are using our TrueSize technology to help Snapchatters find frames that fit them perfectly.
Through new 3D body mesh capabilities, retailers now have the ability to showcase products realistically on the body. This has come to life for brands like Prada that created a bag try-on experience for Snapchatters to shop directly in the camera. Additionally, brands like Farfetch are tapping into these technologies to allow our community to try on and shop a variety of jackets from its catalog. All of these technologies and more are available in Lens Studio for the world’s leading creators and agencies to build for brands.
We also recently built a new AR beauty template in Lens Web Builder, which allows beauty brands to upload their entire catalog and publish AR Lenses quickly and in a cost-effective manner. For example, e.l.f. Cosmetics is able to pull in many of their 800 product SKUs to create unique makeup try-on experiences; and with the Lenses they’ve built thus far, are already seeing Snapchatters engage with their products in new ways. We are in the process of onboarding hundreds of emerging Gen Z-focused beauty brands who will be able to leverage this technology for their AR campaigns. We have a lot more work ahead to build out our technology and increase AR adoption, but we are thrilled with the results that our partners are seeing as we invest in our long-term camera opportunity.
Chief Financial Officer Derek Andersen
As Evan mentioned earlier, our community grew to 293 million daily active users in Q2, an increase of 55 million or 23% year-over-year. The growth in our community continues to be broad-based, with year-over-year and sequential growth on both iOS and Android platforms. In North America, DAU grew by 5 million or 6% year-over-year to reach 95 million. In Europe, DAU grew by 7 million or 10% year-over-year to reach 78 million. In Rest of World, DAU grew by 43 million or 55% year-over-year to reach 120 million. The continued robust growth in Rest of World reflects the benefit of our ongoing investments in local content, local language support, marketing partnerships, and the popularity of augmented reality Lenses created by our global community.
Feedback Loop
One thing to underscore from all of the above is Snap’s continued acknowledgement that AR is driving its revenue growth. It’s experienced the sequence of AR investment, user engagement and ultimately ad dollars. Seeing those results emboldens it to continue doubling down.
Some of the Q2 earnings emphasis was also on Snap’s developer community, which continues to be its lens growth engine. Making Lens Studio more attractive for creators at all skill ranges is correspondingly a guiding principle for Snapchat, seen most recently at its May Partner Summit.
As we’ve examined, this is all key to Snap’s AR virtuous cycle. Robust lens libraries attract users and boost engagement. A growing audience then attracts lens developers which further expand the library and, in turn, more users. And all of the above attracts the real endgame: advertisers.
If Snap’s AR momentum is any indication, we’ll continue to see Lens Studio evolve rapidly. Snap is driven to propel AR as an increasingly-influential component of its revenue model. It’s internalized the feedback loop of AR-driven financial success and is living up to its “camera-company” title.
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Filed under: Features,Trend Analysis,trendline - @ 28. Juli 2021 17:14