Snap Inc, the parent company of popular image-sharing app Snapchat, has unveiled better-than-expected earnings for 2017 - but still posted big losses.
Despite going public a year ago, analysts had expected the company to file disappointing results in its fourth quarter. However, after beating their somewhat downbeat expectations its shares rose by 27 per cent on the announcement.
This increase dwarfed the company's initial $17 IPO price, despite analysts expecting its 74 per cent year-on-year quarterly revenue to begin levelling off as rivals such as Facebook start taking lumps out of its business.
They expect growth to stall due to brand advertisers slashing their marketing budgets after the Christmas period - Snap, though, is forecasting continued growth after a stronger than expected fourth quarter.
In the past, the company has suffered from deflating prices due to its decision to implement pricing algorithms, as opposed to a human sales team hammering the phones.
But during the fourth quarter, Snap managed to trump this issue. According to its earning results, it saw an 18 per cent increase in daily active users, reaching 187 million.
As a result, Snap was able to generate revenues of $285.7 million. Analysts had expected the company to post revenues of $253 million during this period.
However, net losses increased in the previous quarter, doubling to $350 million. Snap has been reducing its burn rate, though. In the prior quarter, it managed to do this by 49 per cent to $255 million.
During the holidays, Snap saw increased spending from advertisers - with average revenue per user reaching $1.53.
That is a growth of 46 per cent compared to the previous rate, although costs per user failed to grow at the same rate - only reaching 36 per cent.
The firm recently rolled out a redesign for Snapchat in a bid to compete with Facebook. While Spiegel admitted that users will need to "take time" to get used to these changes, he believes that it will result in further growth.
In an earnings call, Snap chief executive Evan Spiegel said: "Our business really came together towards the end of last year."
"We executed well on our 2017 plan to improve quality, performance, and automation, which removed friction from our advertising business and improved our application for the Snapchat community.
"This translated into annual revenues that grew 104 percent from the prior year, and 8.9 million Daily Active Users added in the fourth quarter, the highest number of quarterly net adds since the third quarter of 2016."
He explained that this growth "came at a lower cost than the previous quarter" and that "these are big improvements that show how quickly Snap can scale when our products and our ad business are working well together".
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