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By Jaspreet Singh
(Reuters) -Snap beat Wall Street estimates for quarterly profit on Tuesday, benefiting from improvements to the Snapchat parent's advertising platform, sending its shares up 6% in extended trading.
Social media firms and advertisers are navigating an uncertainty around a possible ban of popular short video app TikTok in the U.S. that could help Snap, analysts have said.
"Overall environment of uncertainty (around TikTok) is benefiting our business. Advertisers are very focused on contingency planning and diversifying their spend," CEO Evan Spiegel said on a post earnings call.
Snap could increase price of its Snapchat+ subscription service to boost average revenue per user, Spiegel added. In the fourth quarter, Snapchat+ subscribers doubled to 14 million.
The company has been investing in artificial intelligence and machine learning tools to help create more personalized ads.
It has focused on direct response ads that are designed to prompt specific actions like app downloads or website visits, at a time when there is some weakness in brand awareness ads.
That has helped Snap tap small-and mid-sized businesses, making them the largest contributor to the company's ad revenue growth in 2024.
The company will roll out Sponsored Snaps - video ads that appear in users' inboxes - and Promoted Places, a feature that highlights business locations on Snap Map, to additional markets.
"Snap's diligent work on its ad platform and in diversifying its revenue streams through subscriptions have paid off," said Jasmine Enberg, principal analyst at eMarketer.
Snap reported adjusted earnings per share of 16 cents for the fourth quarter ended Dec. 31, beating analysts' average estimate of 14 cents, according to LSEG-compiled data.
Daily active users of Snapchat increased 9% to 453 million, beating estimates of 450.8 million.
The company forecasts first-quarter revenue of $1.33 billion to $1.36 billion, the mid-point of which was slightly above estimates of $1.33 billion.
It also expects adjusted EBITDA of $40 million to $75 million in the quarter, below expectations of $78.1 million.
Revenue in the quarter jumped 14% to $1.56 billion, marginally beating the average estimate of $1.55 billion.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Maju Samuel and Rashmi Aich)