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Snap Beats Profit Estimates on Advertising Platform Strength

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Snap Inc. (SNAP) exceeded Wall Street’s quarterly profit expectations on Tuesday, benefiting from significant improvements to its advertising platform. This growth helped boost its shares by 6% in after-hours trading. Amid growing uncertainty about a potential ban of TikTok in the U.S., analysts believe Snap could capitalize on the situation.

CEO Evan Spiegel stated that the uncertainty surrounding TikTok has been beneficial to Snap, as advertisers are focused on diversifying their ad spend and contingency planning. Snap is also considering increasing the price of its Snapchat+ subscription service to further raise its average revenue per user. The company reported a significant jump in Snapchat+ subscribers, which doubled to 14 million in the fourth quarter.

Snap has been heavily investing in artificial intelligence and machine learning tools to create more personalized ads. A notable shift in its strategy has been an emphasis on direct response ads, designed to prompt specific actions like app downloads or website visits, particularly as brand awareness ads show signs of weakness. These efforts have allowed Snap to tap into small- and mid-sized businesses, which have become the largest contributors to the company’s advertising revenue growth in 2024.

The company is also planning to expand its advertising formats, such as Sponsored Snaps (video ads in users’ inboxes) and Promoted Places (business location highlights on Snap Map), into additional markets.

“Snap’s diligent work on its ad platform and 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, surpassing analysts’ average estimate of 14 cents. The company also saw a 9% increase in daily active users, reaching 453 million, slightly surpassing the expected 450.8 million. For the first quarter of 2024, Snap forecasts revenue between $1.33 billion and $1.36 billion, with adjusted EBITDA expected to range between $40 million and $75 million, which is slightly below analyst expectations of $78.1 million.

Quarterly revenue rose 14% to $1.56 billion, marginally surpassing the average forecast of $1.55 billion.

 

China Reportedly Considering Sale of TikTok US to Elon Musk as a Potential Solution

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Chinese authorities are reportedly considering a highly unconventional move in the face of ongoing challenges TikTok is facing in the United States. According to sources familiar with the matter, the Chinese government is exploring the possibility of Elon Musk acquiring the US operations of the popular short-video app if efforts to prevent a ban fall short. While Chinese officials have made it clear that they would prefer TikTok to remain under the control of its parent company, ByteDance Ltd., they are reportedly preparing contingency plans in case the app is forced to shut down or sell its US arm. TikTok is currently appealing a potential ban in the US, with the case set to be heard by the US Supreme Court. However, indications from the court’s January 10 arguments suggest that the law might be upheld, making a sale increasingly likely.

The possibility of Musk stepping in to acquire TikTok’s US operations has gained attention due to his ties to former President Donald Trump. Musk, a known supporter of Trump, has previously invested substantial sums to back the former president’s re-election bid, making the prospect of a deal with Musk appealing to Chinese officials. The idea of Musk’s involvement may also align with broader discussions within Beijing on how to navigate its relationship with the Trump administration, which has expressed concerns about TikTok’s potential national security risks.

Musk’s deep involvement in US politics and his support for Trump’s agenda are key factors in why Chinese officials see a potential sale to him as a viable option. In addition to his substantial political influence, Musk has also been tasked with overseeing key initiatives aimed at improving government efficiency. These factors could make him an attractive candidate for a transaction that would allow TikTok to retain a foothold in the US market while addressing the growing regulatory pressures.

While the situation remains fluid, the possibility of Elon Musk purchasing TikTok’s US operations represents an intriguing development in the ongoing tensions surrounding the app’s future in the United States. With the Chinese government weighing its options, the outcome of TikTok’s appeal and the subsequent negotiations could have significant implications for both the tech world and international relations.

TikTok Users in Limbo as App’s Return to U.S. Stores Faces Legal Delays

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TikTok enthusiasts in the United States are anxiously awaiting the app’s return to the Apple and Google app stores, following a tumultuous period marked by legal uncertainties and executive orders. Despite being restored for use after a brief hiatus, TikTok remains unavailable for new downloads, leaving users frustrated.

Key Points:

  • App Still Missing from App Stores: Three days after TikTok was briefly pulled offline in the U.S., users who had deleted the app were unable to reinstall it. The app is still not available for download in the Apple and Google app stores as of Tuesday, caught in legal limbo by U.S. regulations and the two tech giants’ reluctance to bypass the ban.
  • Trump’s Executive Order and Legal Purgatory: U.S. President Donald Trump’s executive order on Monday delayed the enforcement of a ban on TikTok, allowing the app to continue operating in the U.S. for another 75 days. However, the order’s legality is unclear, and companies like Apple and Google are awaiting additional protections before resuming downloads.
  • Possible Sale of TikTok: Amid the ongoing uncertainty, talks regarding the potential sale of TikTok are intensifying. Trump has indicated he is open to discussions with prominent figures like Elon Musk and businessmen Kevin O’Leary and Frank McCourt, who are exploring ways to acquire the app. However, concerns about the legal framework surrounding such deals remain.
  • Mixed Reactions from Users: While some TikTok users are disillusioned by the involvement of Trump in the negotiations, others are eager for the app’s return. Creators have reported feeling confused and frustrated by the delays and legal complexities. Some have resorted to unconventional methods, like changing their location settings, in an attempt to regain access to the app.
  • Legal and National Security Concerns: U.S. lawmakers passed a law requiring ByteDance, TikTok’s parent company, to sell the app due to national security concerns, a ruling upheld by the U.S. Supreme Court. Despite this, there is growing pressure from both Republican and Democratic lawmakers for ByteDance to either sell or face a ban on the app.