1Q18 KEY Takeaways
- Most of the pressure actually came outside its core segment: Partner-Sold and Other revenue declined y/y by -46% and -82%, respectively (collectively down $12M vs. 1Q17). The decline in Other revenue (mostly Spectacles) wasn't much of a surprise, but Partner-Sold revenue had a discrete tailwind from the Winter Olympics that should have mitigated some of the weakness from partner "apprehension", especially considering that NBC covered the event this year. For context, the 2016 Olympics contributed about $17.5M in incremental advertising revenue in 3Q16.
- Big brands may be fading the platform: Ad revenue in its core Snap-Sold segment declined 17% q/q, which isn't a big deal in itself considering seasonal trends. However, mgmt also mentioned that SMB ad revenue grew 30% q/q, so revenue from the bigger brands decelerated in excess of the total business. Further, it's possible that their collective spend may have declined y/y. For context, mgmt suggested during the 4Q17 call that "revenue in Q4 from advertisers outside of Ad Age's Top 100 exceeded revenue from the top 100 advertisers". If outside of the Top 100 is synonymous with SMBs (up 30% q/q), then the math suggests that ad spend from the Top 100 is likely down y/y.
Let us know if you have any questions or would like to discuss in more detail.
