How Will Snap’s DAUs And ARPU Trend In Q4?
Snap (NYSE:SNAP) is expected to publish its Q4’17 results on February 6, reporting on a quarter that saw the company redesign its Snapchat application, while also doubling down on its programmatic advertising strategy. Below, we take a look at some of the key trends to watch when the company publishes results.
We have created an interactive dashboard that details the company’s expected full-year 2017 performance. You can modify segment revenue drivers and margins to see how it impacts the company’s earnings.
Our $15 price estimate for Snap is ahead of the current market price.
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How Will ARPU Trend Over The Holidays?
While we expect Snap’s ARPU to see a sequential bump on account of the holiday season, which generally sees higher spending by marketers, this could be partially offset by Snap’s move to increasingly automate its ad sales. Snap said that it delivered roughly 80% of its ad impressions programmatically during the third quarter, up from 60% in Q2 and none a year ago, and the metric likely increased in Q4. Although programmatic ads allow the company to cut costs and scale up its advertising program, they cause the price of advertisements to decline significantly. For instance, Snap noted that CPMs (cost per thousand impressions) fell by more than 60% year-over-year during Q3.
Will Snapchat Redesign Impact DAU Adds?
During the third quarter, Snap’s daily user growth slowed to all-time lows of just 2.9% on a sequential basis, with the company adding just about 5 million users. We will be looking for updates on how this metric trended over Q4, given that Snap unveiled a redesigned version of the Snapchat app that offers a simpler user interface. Snap began to roll out the update to a portion of its users in early December with a larger-scale rollout happening in the following weeks. Early reviews of the redesign have been mixed and we will be watching for updates on whether this had any sort of impact on Snaps DAU additions over the quarter.
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