Snapchat has the makings of a comeback story.
Snapchat added 13 million daily users in the three months ending in June, ending a long period of lackluster growth and pushing the company’s total audience above 200 million daily users for the first time.
The stronger-than-expected user growth, combined with a slowdown in losses during the quarter, helped drive up shares of Snapchat’s parent company, Snap, about 11% in after-hours trading. It’s now just short of its initial public offering price.
The social media company has been working to right the ship for most of the two years since its initial public offering. After a poorly received redesign of the Snapchat photo-sharing app in late 2017 cost it millions of users, Snap is trying to grow its audience and cut losses as it battles its much bigger rival Instagram. In the second quarter of 2019, it appears to have moved in that direction.
Snap reported a loss of $255 million for the quarter, a 28% improvement from the same quarter a year earlier. Revenue hit $388 million, up 48% from a year earlier and well above analysts’ projections of $360 million.
Executives attributed the revenue growth to investments the company has made in ad products, such as new six-second, unskippable commercial ads on its Discover content. Snapchat also introduced sponsored augmented reality features, with users spending an average of 10 seconds interacting with the photo lenses, the company said.
It attributed user growth, which had stalled last year, to better quality exclusive content. The company reported 35% year-over-year growth in the number of users watching content on Discover every day, and said the total daily time spent watching Discover increased by 60% from the prior year.
Executives said Snapchat’s focus on privacy gives it a competitive advantage.
“Snapchat has been designed to create the feeling of a private conversation, it’s always been ‘delete by default,’” said Jeremi Gorman, Snap’s chief business officer, on the call. “We’re confident in our position because of the regulatory concerns and privacy conversations happening … These values have been baked into our products from the beginning.”
CEO Evan Spiegel did not offer further details on how, exactly, Snap protects users’ photos and data.