While Q2 revenue and and user growth missed expectations for Snap Inc., the parent company of image-messaging service Snapchat, the company underscored the strength of its programmatic and self-serve ad options during a conference call with analysts to discuss the financial results. Snap said 60% of Snap Ads impressions were delivered programmatically in Q2, more than 2x from the previous quarter.
Snap also reported user growth was particularly strong in North America, with 4 million net new users added since the previous quarter. Snapchat reached a milestone during the quarter with more than 25% of smartphone users in the U.S., U.K. and France now using its service every day.
User numbers suggest that highly-coveted younger consumers are spending more time on Snapchat than on Instagram. Snap reported that, in Q2, users under 25-years-old spent more than 40 minutes per day on Snapchat. That compares to 30 minutes for Instagram, per Techcrunch. For the over 25 group, the numbers are 20 minutes for Snapchat and 24 minutes for Instagram.
Snap is being shunned by investors after reporting users numbered 173 million in Q2 2017, up from 166 million in the prior period, while sales reached $182 million. Wall Street was looking for 175 million users and $186 million in sales. Average revenue per user rose 16% to $1.05 in the quarter from the prior period, but was less than an estimate of $1.07 compiled by financial data firm FactSet. Snap posted a net loss of $443.1 million in the period, compared with a loss of $115.9 million a year earlier. The company's shares fell about 20% to $11.31 in extended trading following its earnings release. It went public in March at $17 a share.
The lackluster growth for Snapchat is showing that Facebook's efforts to copy popular features from its younger rival are effective in drawing away users, especially on Instagram. Snap has updated its ad offerings to give advertisers greater flexibility but has struggled to prove it can grow in the digital ad market dominated by the "duopoly" of Facebook and Google.
Snap underscored the success of its ads during the conference call, however, highlighting how Snapchat ads for the retail apparel, movie theatrical release and consumer packaged goods categories are driving higher returns on ad spend compared to other media spend, as measured by Neustar.
Marketer interest in Snapchat is flat to declining as many influencers and creative agencies look to Facebook's Instagram, CNBC reported. Meanwhile, Google is reportedly in talks to create a quick-loading media platform similar to Snapchat's Discover. With most of its user base on iOS, Snap depends on Apple, which has its own augmented reality ambitions in its next iPhone product as well.
Co-founder and CEO Evan Spiegel said on the call with investors that rival services haven't gotten in the way of the company's growth through innovation. However, Snap's reputation for innovation has taken a hit as its offerings are quickly copied and the pace of new ideas hasn't kept pace.
Spiegel has urged investors to think of Snapchat as a messaging product that also has a curated media section. Snapchat doesn't have a feed with ads like Facebook and Instagram, which Facebook also owns. Spiegel said the company wants to focus on lucrative ad markets like the U.S. and not on getting as big as possible, like Facebook, which now has 2 billion users.