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Analyst on social media platforms: ‘Copycatting TikTok is a big trend right now’

Ygal Arounian, Wedbush Securities Managing Director of Equity Research, sits down with Yahoo Finance Live to discuss Snap's growing user base, TikTok's command on social media platform trends and products among younger users, and demand for video content.

Video Transcript

- Snap reporting earnings this afternoon. And the stock is now trading higher here in after hours after the report that has just come across here.

Let's bring in Ygal Arounian, who is the Wedbush Securities Managing Director of Equity Research joining us now. And Ygal, I want to get your first take on Snap and the quarter that, quite frankly, on the financials wasn't good.

YGAL AROUNIAN: Yeah. Thanks for having me.

And I would say overall, the results, like you said, not great. The top line was just slightly below consensus for the first quarter. The revenue guidance and the profitability for the second quarter were below expectations.

That said, there was a comment in the prepared remarks, which they posted to their Investor Relations site, that so far the growth that they're seeing in the quarter is at 30%, but they're being cautious around the macro environment, inflation, and other things in the 20% to 25% official guidance that they've given. I think that's why the stock's up right now. So far, the quarter is doing better than their actual guide and they are building some conservatism based on what we're seeing on the macro.

- What's their plan to evolve and grow beyond this quarter?

YGAL AROUNIAN: That really shouldn't change from what their plan has been. They're focused on a lot around augmented reality. They're doing a lot of things into looking towards the future there. I think they've done a lot to differentiate the platform. They do have their Partner Summit next week, where they'll announce a lot more new products and we'll get a lot more color around that.

But augmented reality, diving further into commerce, tying together augmented reality into commerce across the platform, that's one of their biggest initiatives. That's where you've seen some of the most effort from them.

- Ygal, also, one huge thing that we've watched with regard to this number that we're looking at here, 332 million active users on the platform. It really comes down to not just the users in that total number, but the type of user that Snapchat has traditionally and historically been able to get. And that's the younger user, perhaps growing up over time will have more of that spending power and give them more customer lifetime value if advertisers run campaigns. Is that still in place right now or are you seeing any type of churn?

YGAL AROUNIAN: Well, this is actually one of the biggest topics in digital advertising right now. And it's actually around TikTok and the way TikTok has impacted the entire ecosystem, drawing engagement and users over to that platform and just really kind of spectacular growth, a kind of growth we've never seen from a social media platform at that pace, at the pace that we've seen it for TikTok.

There's been a lot of debate around what the impact has been. Facebook called it out last quarter as an impact. So far, we haven't seen it for Snap. So I think that's one of the other things that's a bit of a positive out of this print. Despite some misses on the revenue side, the user story is still kind of intact. That came in better than expectations. And so far it looks like TikTok really isn't having a big impact on Snap's user base.

That younger demographic is certainly a really important one for advertisers. And as they grow older, if Snap can keep those users there over time, that young demo really is a very valuable one for advertisers.

- It's remarkable. We had a report just last week that showed the ad revenue at TikTok is greater than Snap and Twitter combined this year. What are Snap, what are Twitter, are they doing anything to emulate what you're seeing at TikTok?

YGAL AROUNIAN: Everybody's doing something to emulate what TikTok is doing. I mean, Snap has its Discover product, which-- its Spotlight product, rather, which is basically a copy of TikTok. Facebook has-- or Facebook Meta has it with Reels. Even YouTube has a YouTube Shorts.

So everyone's really moving into this short form video category. There's a lot of focus there, because that's where all the engagement and eyeballs are right now. And Snap and the others are also moving kind of further deeper into this creator economy world, which TikTok has done a great job really kind of capturing, and it's helping payout and share revenue with content creators. And a lot of that is within this short form video.

So there is a lot of focus into creating platforms that are similar to TikTok. Copycatting TikTok is a big trend right now.

- For companies that are monitoring their outbound marketing spend right now, what's the pitch for them to advertise and run a campaign on Snap versus running on some of the alternatives that we were taking a look at on our social media heat map a moment ago?

YGAL AROUNIAN: It's a great question, because there's a lot of evolution there as well. So Apple's privacy initiatives have done a lot to change the landscape there. I think it's taken away some of the power from Facebook. And right now, what advertisers are looking to do more is kind of spread around across different platforms. Each platform has something unique to offer, a unique audience or kind of a unique way that that audience uses that app. And it's actually given a little bit more power to each of the other platforms.

I suspect that Snap has probably benefited from that as well, just a better kind of democratization of the digital media, the paid social landscape. So there's a big factor there. Each platform has something unique to bring to the table. And it's about finding that incremental customer on each of those platforms. So you might not find it on the other one. That's why we're seeing a lot more effort into these smaller platforms right now from advertisers.

- For Snapchat, is this a time where you would like to see them lean further into some of the original content? They tout, of course, in this most recent quarter, Breakwater and 10 million viewers having watched that. Or would you expect them to really push more of that on some of the other publishers to say, hey, we can have a partnership around this, instead of needing to make sure that this is coming off of our own financial statements and the amount that we're spending on content?

YGAL AROUNIAN: The answer, at the end of the day, is whatever works. So if the original content is working, if it's bringing people to the platform, if it's keeping them there and they're spending more time on that original content, then it makes sense to continue to invest there. But you need both. The partnerships are really important, as well. Snapshot is going to just create all of its own content. I wouldn't expect it to be the next Netflix and that kind of strategy of the effort into their own content that way.

So partnering with publishers is going to always be really important for them also. But if the content strategy is working and they're creating original content and it's resonating with their audience, then I would expect them to continue to spend on that as well.

- Yeah. Well, I think I'm old enough to remember when Netflix had actually said that Snapchat was one of their competitors. And it really is this battle for screen time, at the end of the day, too.

Ygal, we've got to continue the conversation at another time. Thanks for helping us break down these earnings here this afternoon. It's Ygal Arounian, who is the Wedbush Securities Managing Director of Equity Research.