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Snap's advertising platform saw a spike in interest in Q2

New data from web analytics firm SimilarWeb found an encouraging trend regarding Snap Inc (SNAP).

“More people are visiting Snapchat to advertise,” according to Pascal Cohen, the head of solution implementation and engineering at SimilarWeb.com. Cohen says the new numbers tell him Snap, “may be becoming relevant.”

Similarweb compared global visits to Snap’s advertising platform ads.snapchat.com, in the second quarter, with visit’s to Facebook’s (FB) advertising platform business.facebook.com.

Snap’s platform surged 23.9% year-over-year to 1.9 million visits. While that number is dwarfed by Facebook’s 452.3 million visits during the same period, Facebook only saw 4.4% growth.

Cohen says investors should keep an eye on this metric.

“We know that Snapchat had some rough years in terms of user engagement. Despite having fewer visits to their ad management page they outgrew 5X Facebook in terms of traffic to their ad management landing page year over year,” he said.

“It’s how they make money,” according to SteelHouse CEO Mark Douglas. SteelHouse is a self-service ad platform serving retailers and the travel industry. Douglas says it makes perfect sense for Snap to invest in its ad platform, but “ultimately Snap has to become a leading social platform.”

Popular filters lead to growth

For a few days last May, Snap downloads on Android operating systems actually surpassed all competitors, according to Similarweb. It was the first time that happened in 12 months and coincided with Snap’s release of new popular filters which allowed users to change genders or reimage themselves as babies.

“The gender swap and baby face filters contributed to downloads and stable engagement,” Cohen says.

The Snapchat messaging application is seen on a phone screen August 3, 2017. REUTERS/Thomas White

Comparing Q2 2019 to Q2 2018, global downloads of Snapchat were up by 37%, according to Similarweb. “People can download apps but engagement is a different matter,” says Cohen and Snap’s engagement has been trending up.

Snap’s DAU on Android operating systems was higher, roughly 13 million, around the filter release, whereas before the release DAU was around 10.5 million. More encouraging for Snap is the fact that DAU, according to Cohen, has remained elevated at 11.6 million.

Encouraging trends when SNAP reports earnings

Goldman Sachs recently upgraded SNAP to a “Buy,” writing in a note to investors, “Our checks with advertisers also lead us to believe that the company’s continued innovation in its ad-stack, particularly in self-serve, should allow SNAP to substantially improve monetization of user time spent on the platform over time.”

Credit Suisse also sees potential, writing in its July 9 note to investors, “There remains significant room for the company to increase the ad load in pursuit of revenue growth.”

Credit Suisse calculates Snap shows less than two ads per session on average but expects that to grow because of the revamped Android app and because “Snap is a scarce asset that offers advertisers access to a coveted younger demographic.”

But SteelHouse’s Douglas says advertisers want the scale they get from Facebook. “The user engagement is the big issue that is holding the company [Snap] back,” Douglas said. “Advertisers want scale, and Snap is struggling with that because of competition with Instagram.”

Snap reports second quarter earnings on Tuesday after the bell. Analysts are expecting a loss of $0.10 per share on revenue of $360.75 million, a roughly 38% increase YoY. Douglas says Snap is making progress.

“I think advertisers really are eager and ready to see Snap grow the user community,” he said, adding that they now have the platform in place to capture revenue if they succeed.

NOTE: This article was originally published on July 19, 2019.

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Adam Shapiro is co-anchor of Yahoo Finance On the Move.

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