Social media companies. Pixabay Image.
This article presents the revenue, profitability, and margins of Snap Inc. (NYSE: SNAP).
Snap Inc. provides a detailed breakdown of its revenue by segments and regions.
The revenue segment that we will cover in this article includes the company’s advertising revenue.
For the revenue by region, Snap Inc. provides the sales numbers from North America, Europe, and the Rest of World.
The North American region includes Mexico, the Caribbean, and Central America.
On the other hand, the European region includes Russia and Turkey. Effective March 2022, Snap halted advertising sales to Russian and Belarusian entities.
The Rest Of World region includes countries outside of North America and Europe.
All said, let’s get the ball rolling!
Please use the table of contents to navigate this page.
Table Of Contents
Overview
O1. Definitions
O2. How Does Snap Earn Revenue
O3. Strategy And Business Model
Consolidated Revenue
A1. Revenue By Year
A2. Revenue By Quarter
A3. Revenue By TTM
A4. Growth Rates Of Revenue By TTM
Consolidated Profits And Margins
B1. Gross, Operating, Net Profit And Adjusted EBITDA
B2. Gross, Operating, Net Profit And Adjusted EBITDA Margin
Segment Revenue
C1. Advertising Revenue
C2. Advertising Revenue In Percentage
Regional Revenue
D1. North America, Europe, And Rest Of World Revenue
D2. North America, Europe, And Rest Of World Revenue In Percentage
D3. Growth Rates Of North America, Europe, And Rest Of World Revenue
Summary And Reference
S1. Conclusion
S2. References and Credits
S3. Disclosure
Definitions
To help readers understand the content better, the following terms and glossaries have been provided.
Adjusted EBITDA: Adjusted EBITDA is a non-GAAP measure provided by Snap Inc.
According to Snap, it is defined as net income (loss), excluding interest income; interest expense, other income (expense), net; income tax benefit (expense); depreciation and amortization; stock based compensation expense; payroll and other tax expense related to stock-based compensation; and certain other non-cash or non-recurring items impacting net income (loss) from time to time.
AR Ads: AR Ads stands for augmented reality advertisement. It is one of Snap Inc.’s advertising products.
AR ads take advantage of the reach and scale of Snap’s augmented reality platform to create visually engaging 3D experiences, including the ability to visualize and try on products such as beauty, apparel, accessories, and footwear.
Snap Ads: Snap Ads is another Snap Inc’s advertising products. It includes conventional advertisements such as single images or video ads.
Revenue By Region: According to Snap Inc., revenue for geographic reporting is apportioned to each region based on Snap’s determination of the geographic location in which advertising impressions are delivered, as this approximates revenue based on user activity.
This allocation is consistent with how ARPU is determined.
Snapchat: Snapchat is the flagship product of Snap Inc. It is the company’s core mobile device application and visual messaging app.
According to Snap Inc., the primary purpose of Snapchat is to enhance user experience with friends, family, and the world through augmented reality, video, voice, messaging, and creative tools.
Users can interact with each other through five primary products within the Snapchat app: Camera, Visual Messaging, Snap Map, Stories, and Spotlight.
How Does Snap Earn Revenue
Snap Inc. generates the majority of its revenue through advertising products, including Snap Ads and AR Ads, offered on Snapchat.
This revenue is earned through displaying advertisements on the Snapchat platform, known as advertising revenue.
Snap Inc.’s advertising options include lenses, filters, commercials, collection ads, etc., which appear between users’ stories and are a key source of revenue for the company.
Snap’s financial success largely depends on its ability to attract advertisers and engage users.
Strategy And Business Model
Snap Inc.’s business strategy is to emphasize innovation and prioritize long-term user engagement over short-term financial gains or
results, according to its annual reports.
Due to its long-term focus, the company may prioritize investments and expenses necessary for growth over short-term profitability.
Snap Inc. has a history of operating losses, and the losses are expected to continue due to its investment for the long term.
Since its inception in 2011, Snap Inc. has significantly evolved its business model. In 2017, the company transitioned from advertising sales to a self-serve platform.
Revenue By Year
Snap-Inc-revenue-by-year
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Globally, Snap’s revenue increased by 12% to US$4.6 billion in 2022 from US$4.1 billion in 2021.
Snap’s record revenue of US$4.6 billion in 2022 was up 84% from 2020 and 475% from 2017.
Revenue By Quarter
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Snap earned revenue of US$1.2 billion, US$1.1 billion, and US$1 billion in 3Q, 2Q, and 1Q 2023, respectively.
The 3Q 2023 revenue result represents a rise of 5% over the same quarter a year ago.
Revenue By TTM
Snap-Inc-revenue-by-ttm
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The TTM plot above looks much smoother than the quarterly plot and illustrates the incredible growth of Snap’s global revenue in the earlier years.
However, Snap’s revenue has remained relatively flat in the post-pandemic era since 2022, as presented in the TTM chart above.
As of 3Q 2023, Snap’s TTM revenue reached US$4.5 billion, down slightly over a year ago.
Growth Rates Of Revenue By TTM
Snap-Inc-growth-rates-of-revenue-by-ttm
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The growth rate plot above clearly shows that Snap’s revenue growth has significantly declined in post-pandemic periods.
After reaching the peak in 2021, Snap’s revenue growth has slowed, as presented in the chart.
As of 3Q 2023, Snap’s revenue growth came in at -1.2% compared to 23.3% recorded a year ago.
In short, Snap’s declining revenue growth in the post-pandemic era is a concern.
Gross, Operating, Net Profit And Adjusted EBITDA
Snap-Inc-profitability
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At first look, Snap Inc. is not a profitable company.
Although the company makes an incredible amount of gross profit, it suffers significant losses in operating profit and net profit.
As the chart shows, Snap has consistently experienced losses in operating and net profits in all fiscal years.
In addition, the company generates a paltry amount of adjusted EBITDA or cash earnings in most fiscal years, suggesting poor cash flow for the social media company.
In short, Snap Inc. has never turned a profit since 2017.
Gross, Operating, Net Profit And Adjusted EBITDA Margin
Snap-Inc-margins
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As shown in the chart above, Snap Inc. has poor margins similar to its profitability.
Although the company’s gross margin reaches over 60%, it has never had a positive operating and net profit margin, suggesting that it has never made a profit.
In fiscal 2022, Snap’s gross margin topped 60.5%, while its operating margin dived to -30.3% and the net profit margin declined to -31.1% in the same period.
In addition, Snap generates inconsistent adjusted EBITDA margins in most fiscal years, illustrating the company’s poor cash flow production.
Again, Snap Inc. is not profitable and has poor margins.
Advertising Revenue
Snap-Inc-advertising-revenue
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As shown in the chart above, Snap makes the majority of its money from advertising revenue.
In fiscal 2022, Snap Inc. earned US$4.6 billion in advertising revenue, up 12% over 2021 and almost double the figure in 2020.
Since 2017, Snap’s advertising revenue has grown by 470%, a clear indication of its successful and growing business strategy.
Advertising Revenue In Percentage
Snap-Inc-advertising-revenue-to-total-revenue-ratio
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As shown in the chart above, Snap Inc. derives most of its revenue from advertising sales.
For example, in fiscal 2022, Snap’s advertising revenue accounted for 99% of the company’s total revenue.
Moreover, this ratio has remained relatively unchanged since 2017, suggesting the importance of advertising revenue to the company.
To put it simply, Snap relies on advertising income to stay afloat. Without advertising income, Snap would face significant financial challenges and could struggle to remain a viable platform.
North America, Europe, And Rest Of World Revenue
Snap-Inc-revenue-by-region
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For revenue or sales by user geographical region, Snap’s North America contributes the bulk of the sales to the company, notably at US$3.2 billion in 2022.
In addition, Snap’s revenue from the North American region came in at US$3.0 billion, US$1.8 billion, and US$1.2 billion in fiscal 2021, 2020, and 2019, respectively.
Snap earned roughly the same revenue from Europe and Rest Of World regions, at $712M and $653M, respectively, in fiscal 2022.
A noticeable trend is Snap’s rising revenue in all geographical regions.
For example, Snap’s revenue from North America has increased nearly four-fold since 2018, while sales from Europe have grown by 283% over the last five years.
Snap’s revenue from the Rest Of World has grown at an even more impressive rate, almost 1000% since 2017.
North America, Europe, And Rest Of World Revenue In Percentage
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Snap derived as much as 70% of revenue from North America in 2022, the largest among all regions in comparison.
This ratio has slightly decreased since 2017 but has remained relatively stable over the last three years.
On the other hand, Snap’s revenue from Europe accounted for 15.5% of its total revenue in 2022, while the Rest Of World region contributed about 14.2% of sales to total revenue in the same period.
Similarly, these ratios have slightly increased over 2017 but have remained unchanged over the past several years, illustrating the steady revenue contribution from these regions.
In short, North America is Snap Inc.’s largest revenue source, with sales totaling US$3.2B or 70% of total revenue in fiscal 2022.
Growth Rates Of North America, Europe, And Rest Of World Revenue
Snap-Inc-growth-rates-of-revenue-by-region
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In comparison, Snap’s revenue growth was the worst in 2022 for all regions.
For example, Snap’s North American revenue growth in 2022 came in at only 8.8%, while revenue growth in Europe totaled 13.4% compared to 67.5% and 57.4% recorded in 2021 for North America and Europe, respectively.
Similarly, Snap’s revenue growth in the Rest Of World decreased considerably in 2022 to only 26.8% compared to 54.7% reported in 2021.
To put it briefly, Snap Inc. witnessed the most sluggish growth in revenue in 2022 as compared to the years since 2017.
Since 2017, the Rest Of World region has had the highest average growth rate at 70%, compared to Europe at 49% and North America at 39%.
Summary
In summary, Snap’s revenue has significantly risen since 2017 but has slowed considerably since 2022.
Snap is not a profitable company and has consistently experienced operating losses.
Snap’s North America has been the company’s largest revenue stream, generating up to 70% of the company’s total sales or US$3.2B in 2022.
Among all regions, the Rest Of World region has outperformed North America and Europe in revenue growth.
References and Credits
1. All financial figures presented in this article are obtained and referenced from Snap Inc.’s quarterly and annual reports, earnings releases, investor letters, SEC filings, press releases, etc., which are available in Snap Investor Relation.
2. Pixabay Images.
Disclosure
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