The pandemic was a fortune for social media platforms. Virtual worlds served their users well when the physical world became less hospitable. But as Covid-19 cases fell this spring in the U.S. and much of the world, the effects of the pandemic on our use of social media did not reverse, according to recent earnings reports.
Snapchat and Twitter, two beloved stock exchanges over the past year, have seen their prices triple by last March. After posting impressive second-quarter earnings results on July 22, neither shows any sign of altitude loss. Snap and Twitter saw their stock prices rise 15% and 5%, respectively, in overtime trading.
Snapchat led the way. Quarterly revenue, driven primarily by advertiser demand and product improvements, rose 116% year-over-year to $ 982 million. Snapchat’s user base grew 23%, to 293 million daily active users compared to the period a year ago. Twitter posted similar gains, with quarterly revenue up 74%, to $ 1.19 billion, and monetizable daily active users up 11%, to $ 206 million, over the same period.
Part of that, as Twitter pointed out in the shareholders ’letter, reflects a slowdown in advertiser activity last June amid the pandemic and protests over the assassination of George Floyd, which slightly inflated year-on-year figures. But even more, these figures show that a relaxing pandemic is not holding back the growth of these companies.
Keep people engaged
For Snap and Twitter, which make money primarily by posting ads to their users, the key to success is to keep users engaged and on the platform.
To do so, Snap has released a number of new products in recent years, including original shows, an interactive map and lots of augmented reality. Ever since Facebook stole the “Snapchat Stories” feature (a vertical photo or video that disappears in 24 hours) and mastered the formula on Instagram, Snap has responded by creating a complete ecosystem designed to keep users engaged. He even stole a bit of himself, releasing TikTok-inspired Spotlight, which reached 180 million unique users this quarter. (For what it’s worth, Snap reported that fewer users post stories and view their friends ’stories, so that might pose future issues for Instagram).
The challenge for Snap, which has a massive audience, is to take advantage of this user base. The future, according to CEO Evan Spiegel, includes “reinventing the shopping experience” (pdf) with augmented reality and e-commerce, including clothing with AR and cosmetic testing.
It seems that Twitter has also averted another possible crisis in use. Twitter, the main source of political talks and news, has not clearly seen the decline in activity stemming from the political defeat of former President Donald Trump and the forced removal of his platform, as well as virtually all social media. While the media world has felt a precipitous drop in traffic since the election, Twitter seems to have avoided it for now.
Apple’s plot twist
Both platforms prevented a possible revenue hit when Apple allowed iPhone users to limit advertiser tracking and targeting.
The tech giant introduced a major change in May by giving iPhone users the option to opt in (rather than turn it off) for tracking outside of a particular app (the apps you use can still make you a monitoring within the application). This was considered a threat to digital advertisers who relied on user data to sell effective advertising on platforms such as Snap and Twitter. According to a report, only 10% of users have chosen to allow applications to track them.
So far, the two platforms have not reported any serious interruptions, although it may be too early to tell. Twitter said it only saw a “modest impact” of the changes, which went into effect with iOS 14.5 in May, and Snap said the full effects may not be evident for months.
But most social platforms reduce their reliance on advertising: Twitter introduces new subscription and tip products, and Snap focuses on e-commerce opportunities. For now, it seems that the behavior of users and advertisers does not portend serious revenue problems. So far, we’re still hooked on our phones and advertisers still want to get us where we are. This means good business for social media companies.