Specialist
Former Manager at Snap Inc
Agenda
- Social media industry dynamics and growth
- Competitive landscape evolution, driven by new offerings and features
- International opportunities and challenges
- Can Snapchat remain popular with a younger demographic and concurrently become more of a mainstream mobile app?
- Outlook on users, revenues and profitability for Snap (NYSE: SNAP)
Questions
1.
Could you provide a brief description of Snap and its primary mobile app Snapchat?
2.
Snap generates most of its revenues from advertising. Can you highlight two or three major trends that are impacting this on a global basis?
3.
Zenith has projected around USD 84bn in global social media advertising spending this year, which would make social media the third largest advertising channel behind TV and paid advertising. Slowing growth for social media ad spending is predicted from 20% this year to 17% in 2020 and 13% in 2021. What are your thoughts on these projections and how Snap plays into them?
4.
How do you think about Snap from a competitive perspective? Who do you think are Snap’s primary competitors and how do you think they compare with Snapchat as an offering?
5.
What do you think enables the company to compete successfully against much larger companies and apps? You mentioned Facebook and Instagram.
6.
To what extent do you think Snap eventually will broaden Snapchat’s appeal beyond the 13-30 demographic and how?
7.
When asked about TikTok, Snap CEO and founder Evan Spiegel claimed he saw TikTok as a partner more than a competitor, as Snapchat distributes TikTok’s videos. How would you frame the two offerings of Snapchat and TikTok? Are they more aligned or are they emerging competitors?
8.
Could you discuss some of Snap’s most important offerings and how you think it has evolved over the last couple of years? I think one of the reasons that Snap has been successful and able to compete with much larger companies is, as you alluded to, the CEO’s singular focus on innovation and user experience.
9.
Discover is a differentiated focus for the company. In Q3 you had more than 100 Discover channels each reaching a monthly audience of over 10 million viewers. What are the advertising opportunities for Discover and Snap Originals? How is the company thinking about this from a monetisation and revenue perspective?
10.
What advertising has Snap been experimenting with as it pertains to Discover and Originals? Are ads at the beginning of content, or is it more sophisticated and less intrusive while still resonating with users and advertisers?
11.
What are your thoughts on Spectacles? Snap released Spectacles 3 in August. I think a lot of people wonder why the company continues to release updates to Spectacles. What is the strategy behind the product?
12.
To what extent is the company focused on international usage and looking to get more internationally oriented content on the platform? Only 40% of daily active users are from North America, which implies considerable international usage.
13.
The Q3 results included some ARPU information. Europe and the rest of the world are far lower than North America. North America was almost four times Europe and the rest of the world. How much head room do you see for Europe and rest of world? This is USD 1.05 and USD 1.01 for those two geographies, compared to North America’s USD 3.75. How much upside do you expect and when do you expect Snap to get there?
14.
North America showed 43% growth in ARPU in Q3, but Europe and the rest of the world showed 24% and 21% ARPU growth. How do you explain that?
15.
To what extent do you think Instagram and TikTok can continue with their success and gain share against Snap, or at least increase reach significantly? My sense is Snap skews younger than Instagram, which skews younger than Facebook, but TikTok may skew younger than all three. How do you think about that from a reach perspective, in that it seems like multiple apps are looking to focus on that younger demographic? I think Facebook Dating, might be a way to pursue greater engagement with the younger demographic as well.
16.
What do you think about lenses? Are lenses about driving mind share when it comes to innovation? Is it about the concept of increasing engagement? Is there revenue coming from that offering, given what is a substantial outlay of expenses related to developing and improving that?
17.
What is the starting price of advertising revenue coming in from lenses? If a major advertiser wanted to create a lens in conjunction with a product launch, what might a campaign cost?
18.
You probably noted that revenues rose 50% in Q3, well above most people’s expectations, and it reflected continuing investment in the business. Were you surprised by this level of growth, and what do you think some of the primary growth drivers were in the quarter?
19.
The relaunch of the Android app was highly anticipated and took a lot more time than many expected. Did you expect difficult comparisons in revenue growth deceleration, acceleration or growth in general, impacted by more difficult comparisons come this time next year?
20.
29% of Q3 revenues were derived from outside the North America, compared with 31% in the prior year period. There has not been much change in international contribution to growth over the past year. Is that something that you expect to change, given the company’s interest in and focus on international?
21.
Is there anything Snap is doing to address international opportunities and can you mention some high priority geographies outside the US?
22.
If 30% roughly of revenues were derived from outside North America, is 50% something that could be achieved relatively quickly? What do you think about as a timeline?
23.
Greater China was a notable factor in Q3. It accounted for 10% of revenues for the first time. Can you discuss how revenue is generated from a country where Snapchat is not available?
24.
SG&A was flat sequentially in Q3 and it seems there has been decent expense management regarding this particular line item. What do you think about the company’s efforts to increasingly develop and deploy a more automated sales system, as well as associated processes? Have those been contributing to some of the leverage in the SG&A line?
25.
R&D fell sequentially in Q3 and increased only modestly on an annual basis. What contributes to R&D spend and how can Snap continue to innovate if it is carefully managing related expenses?
26.
The company has what I think most would consider a healthy balance sheet, USD 2.3bn in cash and short- term investments. It sold USD 1.3bn in convertible notes in August. I think it has a net carrying amount just below USD 900m. Can you outline uses of cash in M&A? The company has been quiet on this front over the last year and a half or so, but had success with Bitstrips which developed Bitmoji. Can you discuss Snap’s M&A philosophy and whether you expect the company to become more aggressive given the balance sheet and the fact that a lot of the competitors are probably restrained for various reasons?
27.
You referenced the Co-founders, CEO Evan Spiegel and CTO Bobby Murphy, who not only founded the company, but still control it through voting shares. What do you think about them as managers, in light of the fact that there has been a tremendous amount of turnover in the executive ranks and also in the rank and file employees?
28.
What is your one prediction related to Snap or Snapchat for 2020?
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