“Copying TikTok is a big trend right now”
Ygal Arounian, Managing Director of Equity Research at Wedbush Securities, speaks with Yahoo Finance Live to discuss Snap’s growing user base, TikTok’s command of trends and social media platform products among young users, and the demand for video content.
– Snap reporting revenue this afternoon. And the stock is now trading higher here after hours following the report that just dropped here.
Let’s introduce Ygal Arounian, who is the managing director of equity research at Wedbush Securities, who joins us now. And Ygal, I want to get your first take on Snap and the quarter that, quite frankly, on financials wasn’t good.
YGAL AROUNIAN: Yeah. Thank you for.
And I would say that overall the results, like you said, aren’t great. Revenue was slightly below consensus for the first quarter. Revenue forecasts and profitability for the second quarter were below expectations.
That said, there was a comment in prepared remarks, which they posted on their investor relations site, that so far the growth they’re seeing in the quarter is 30%, but they’re cautious about the macroeconomic environment, inflation, and other things within the 20-25% official guidelines they’ve given. I think that’s why the stock is up right now. So far the quarter is doing better than their current guide and they are establishing some conservatism based on what we are seeing on the macro.
– What is their plan to evolve and grow beyond this quarter?
YGAL AROUNIAN: This really shouldn’t change from their plan. They focus a lot on augmented reality. They are doing a lot of things to look to the future there. I think they did a lot to differentiate the platform. They have their Partner Summit next week where they’ll be announcing a lot more new products and we’ll have a lot more color around that.
But augmented reality, diving deeper into commerce, tying augmented reality to commerce across the platform, that’s one of their biggest initiatives. This is where you saw the most effort from them.
– Ygal, too, a massive thing we’ve seen in terms of that number we’re looking at here, 332 million active users on the platform. It doesn’t just depend on the users of that total number, but what kind of user Snapchat has traditionally and historically been able to get. And that’s the young user, maybe as they grow over time, they’ll have more buying power and give them more lifetime value if advertisers run campaigns. Is it still in place right now or do you see some type of unsubscribe?
YGAL AROUNIAN: Well, it’s actually one of the hottest topics in digital advertising right now. And it’s actually around TikTok and how TikTok has impacted the whole ecosystem, driving engagement and users to this platform and just really spectacular growth, kind of growth that we’ve never seen from a social media platform at this rate, at the rate that we’ve seen for TikTok.
There has been much debate about the impact. Facebook called it last quarter as an impact. So far, we haven’t seen it for Snap. So I think that’s one of the other things that’s a bit positive from that impression. Despite some hiccups on the revenue side, the user story is still intact. It came better than expectations. And so far, it looks like TikTok isn’t really having an impact on Snap’s user base.
This younger demographic is certainly very important to advertisers. And as they age, if Snap can keep those users there over time, that young demo is really, really valuable to advertisers.
– This is remarkable. We had a report last week that showed TikTok ad revenue was higher than Snap and Twitter combined this year. What is Snap, what is Twitter, are they doing anything to mimic what you see on TikTok?
YGAL AROUNIAN: Everyone is doing something to emulate what TikTok is doing. I mean, Snap has their Discover product, which – their Spotlight product, rather, which is basically a copycat of TikTok. Facebook has — or Facebook Meta has it with Reels. Even YouTube has YouTube shorts.
So everyone is really heading towards this category of short videos. There’s a lot of attention there, because that’s where all the engagement and the eyeballs are right now. And Snap and others are also getting a little deeper into this world of the creator economy, which TikTok has done a great job of capturing, and that helps pay and share revenue with content creators. And a lot of that is in this short video.
So there is a lot of focus on creating platforms similar to TikTok. Copying TikTok is a big trend right now.
– For businesses currently watching their outbound marketing spend, what is the benefit to them of advertising and campaigning on Snap versus some of the alternatives we were looking at on our social media heatmap a while back? a moment ?
YGAL AROUNIAN: That’s an excellent question, because there’s a lot of evolution there too. So Apple’s privacy initiatives have changed the landscape a lot there. I think that took away some of the power of Facebook. And right now what advertisers are looking to do more of is kind of spread across different platforms. Each platform has something unique to offer, a unique audience, or a unique way that audience uses that app. And that actually gives each of the other platforms a bit more power.
I suspect Snap probably benefited as well, just a better democratization of digital media, the paid social landscape. So there is an important factor. Each rig has something unique to bring to the table. And it’s about finding that extra customer on each of those platforms. So you may not find it on the other. That’s why we’re seeing a lot more advertiser effort right now on these smaller platforms.
– For Snapchat, is this a time when you’d like to see them lean more into some of the original content? They’re bragging, of course, in this last quarter, Breakwater and 10 million viewers watching it. Or would you expect them to push some of the other publishers more to say, hey, we can have a partnership around this, instead of having to make sure this comes from our own financial statements and how much we’re spending- us in content?
YGAL AROUNIAN: The answer, at the end of the day, is whatever works. So if the original content works, if it gets people to the platform, if it keeps them there and they spend more time on that original content, then it makes sense to keep investing there . But you need both. Partnerships are also very important. Snapshot will simply create all of its own content. I wouldn’t expect it to be the next Netflix and that kind of strategy effort into their own content that way.
So partnering with publishers will always be very important to them as well. But if the content strategy works and they create original content and it resonates with their audience, I expect them to keep spending on that as well.
– Yeah. Well, I think I’m old enough to remember when Netflix said Snapchat was one of their competitors. And it’s really that battle for screen time, at the end of the day too.
Ygal, we have to continue the conversation at another time. Please help us break down those gains here this afternoon. It’s Ygal Arounian, who is the managing director of equity research at Wedbush Securities.