Cheat Sheet: Snap’s e-commerce focus keeps up momentum in first-quarter earnings

The header image features an illustration with a dollar bill that has the Snapchat logo in the center.

Snap beat first-quarter estimates yesterday, and continues to lean into its video and AR ads to drive e-commerce through its younger audience. 

Snap piqued Wall Street’s interest several years ago when its founder, Evan Spiegel, described the social platform as a “camera company.” But lately, it has been acting more like a digital department store, gobbling up startups that facilitate try-ons and showrooming across different product categories.

Those moves figure to add to the momentum reflected in Snapchat’s first quarter earnings. 

The key details: 

  • Snap announced revenues of $770 million, compared to $462 million in the same quarter last year, up 66% year over year.
  • Daily Active Users were 280 million, compared to 229 million in the first quarter of 2020, and 265 million for fourth quarter 2020.
  • The company continues to operate at a loss, posting a net loss of $287 million.
  • Snap will keep focus on AR as a way to drive e-commerce, especially in apparel and accessories.

Sell, sell, sell

Snap’s first-quarter revenue growth might be the first indicator of how the overall digital advertising industry is doing — and brands’ appetite for spending.

During Snap’s previous earnings call, chief business officer Jeremi Gorman noted that the platform reorganized its sales force to focus on three tiers of customers, two of which are focused on e-commerce — large enterprise clients, advertisers focusing on VR usage to drive e-commerce, and small e-commerce advertisers. 

In yesterday’s presentation, Gorman said the company is focused on continued investment in the ad platform, including augmented reality, especially for clothes and accessories, and video ads, which is the company’s biggest revenue driver.

“Snap has the best AR offerings and provides more opportunity for innovation with their ad units,” said Erika Mahon, group director of audience activation at dentsu Media. “We see a lot of CPM efficiency on Snap compared to other platforms and it’s a key player in reaching a younger demo.” But Mahon added that Snapchat had less scale than other platforms, and fewer targeting options.

Buy, buy, buy

Snap has acquired at least three companies that could help drive e-commerce on its platform, including Fit Analytics, which helps model shoes; Screenshop, a “Shazam for clothes” that can detect clothing and furniture in digital images; and, which uses artificial intelligence to power customer service conversations. 

Snap also partnered with Perfect Corp., an augmented reality and AI service provider that helps drive try-on and testing for beauty brands. 

In January, Snap filed a patent for technology that would allow its app’s users to try on clothing using its Bitmoji avatars. 

“Overall, it’s still early for augmented reality,” said Derek Andersen, Snap’s CFO. “But when brands do experiment, we want them to have a positive experience.”

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