Shares of Meta Platforms (NASDAQ: META) and Snap (NYSE: SNAP) went in opposite directions following their latest earnings reports. Meta’s stock soared by 5% on Aug. 1 after easily exceeding analysts’ estimates in both top and bottom lines for the second quarter. Snap, on the other hand, witnessed a significant 16% decline on the same day due to fourth-quarter revenue falling below expectations.
Historically, Meta’s stock has surged by nearly 40% over the past three years, while Snap’s stock tumbled by over 80%. The question remains: will the social media behemoth Meta continue its dominance over the struggling Snap?
Image source: Getty Images.
The Race for Users: Who’s Coming Out on Top?
Meta stands as the largest global social media titan, concluding the second quarter of 2024 with a whopping 3.27 billion daily active user (DAU) count across its suite of apps (Facebook, Instagram, Messenger, and WhatsApp) – marking a 7% increase from the previous year. On the flip side, Snap carved out a loyal user base among the younger generation, boasting a 9% growth in its total daily active users, reaching 432 million in the second quarter of 2024.
While Meta has managed to maintain steady growth in its DAU count, Snap experienced a slowdown, with its growth slipping into single digits in the latest quarter. Should this trend persist, Snap may find itself trailing Meta in daily audience expansion.
Metric | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 |
|---|---|---|---|---|---|
Meta Platforms DAP growth (YOY) | 7% | 7% | 8% | 7% | 7% |
Snap DAU growth (YOY) | 14% | 12% | 10% | 10% | 9% |
Data source: Quarterly earnings reports. YOY = year over year.
The Revenue Rumble: Which Titan Reigns Supreme?
While both Meta and Snap derive the majority of their revenue from advertisements, Meta has showcased superior revenue growth over the past year compared to Snap. This is despite the fact that Snap was adding daily active users at a faster rate than Meta.
Metric | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 |
|---|---|---|---|---|---|
Meta Platforms revenue growth (YOY) | 11% | 23% | 25% | 27% | 22% |
Snap revenue growth (YOY) | (4%) | 5% | 5% | 21% | 16% |
Data source: Quarterly earnings reports.
For the upcoming quarter, Meta foresees a revenue growth between 13% to 20% year over year, while Snap is expecting a growth rate of 12% to 16%. The situation raises concerns when the underdog lags behind the market leader in growth rate.
Meta’s outperformance is underpinned by its ability to attract advertising investments from Chinese e-commerce and gaming firms, enhance ad prices and impressions, expand its Reels short video platform to challenge TikTok, and harness first-party data using AI to counter the privacy changes introduced by Apple on iOS.
Conversely, Snap struggled to engage Chinese advertisers, witnessed limited success with its Spotlight video platform in competing with Reels and TikTok, saw a decline in ad prices despite a rise in ad impressions, and has been overly dependent on international users – a demographic yielding significantly lower ad revenues compared to North American users – to fuel its DAU expansion.
Profitability Showdown: The Battle for the Bottom Line
Meta has managed to sustain profitability on a generally accepted accounting principles (GAAP) basis consistently, despite subsidizing its unprofitable Reality Labs division (responsible for VR and AR devices) using higher-margin ad revenues. Snap, on the flip side, is yet to turn profitable on a GAAP basis and is likely to remain in the red for the foreseeable future.
Metric | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 |
|---|---|---|---|---|---|
Meta Platforms operating margin | 29% | 40% | 41% | 38% | 38% |
Snap operating margin | (38%) | (32%) | (18%) | (28%) | (21%) |
Data source: Quarterly earnings reports. GAAP basis.