Snapchat’s spike in users from coronavirus lockdowns has begun to taper off, despite a pause in reopening across many states forcing people to continue staying home.
“At the onset of widespread shelter in place orders, as people sought to stay connected and entertained from home, we observed an increase in daily active users that informed our initial estimate,” Derek Andersen, chief financial officer of Snap (SNAP)chat’s parent company Snap (SNAP), said during its second quarter earnings call Tuesday. “This initial lift dissipated faster than we anticipated as shelter in place conditions persisted.”
Snap’s daily active users were 238 million for the three months to June, an increase of 17% from the same period last year but just shy of the company’s estimate of 239 million during its last earnings call in April. It was also slower year-on-year growth than the 20% recorded in the previous quarter.
The company’s stock fell as much as 10% in after-hours trading before recovering somewhat.
The pandemic has also affected advertising, which accounts for the bulk of Snap’s revenue. Disruptions to industries such as transportation services, restaurants and entertainment venues led marketers to cut ad spending, Andersen said, adding that several other advertisers paused in order to rework their advertising strategy for the pandemic.
“These challenging circumstances interrupted otherwise robust momentum,” he said.
Some of the slowdown was offset by increased advertising in areas such as e-commerce, streaming and gaming, which CEO Evan Spiegel said were “leaning in” to Snap’s platform. Advertising revenue grew 17% in the quarter compared to the same period last year, to $454 million. That fell short of the $462 million in revenue the company reported in the previous quarter, a year-on-year increase of 44%.
“While our revenue growth rate continues to be impacted by ongoing market disruptions, the fundamentals of our business are strong,” Spiegel said.