META and SNAP Q4 2023 Earnings Results and Trends

META's 4Q23 EPS and revenue exceeded expectations due to increased demand from Chinese ecommerce retailers. Sensor Tower data confirmed this, showing Temu as the second largest advertiser on Facebook's ad network in 2023. Reels has become a major engagement driver for Meta, with 42% of US Instagram user time spent on the feature. SNAP's shares dropped 30% after missing revenue estimates, citing the Middle East conflict as a hindrance. However, their partnership with Spotify to showcase podcast content could boost user engagement in North America, especially in the US.

Key Takeaways:

META smashed 4Q23 street estimates for both EPS and revenue, powered by advertising demand from Chinese retailers. Pathmatics by Sensor Tower data shows that ecommerce upstart Temu increased US ad spend by triple-digits YoY on Facebook (+318%) and Instagram (+100%) in 4Q23, far outpacing ad spend growth by other retailers such as eBay, Amazon, Walmart, and Target
- On Facebook’s US ad network, Temu ran 17x more creatives than Shein, 6x more than Amazon, 4x more than Walmart, and 3x more than Home Depot throughout 2023
Meta noted that short-form video feature Reels continued to be a major driver of engagement during the quarter. Per ST’s proprietary panel data, the majority of US user time spent in-app (42%) on Instagram in Dec’23 was on Reels, far outpacing that of legacy features such as the main feed (28%) and story (8%)
- Instagram also led its peers in growing its levels of user engagement throughout 2023. Per ST data, Instagram hours engaged/day increased 26% YoY in 4Q23, vs Snapchat (+8%), Facebook (+5%), TikTok (+2%), and X (-12%). From 1Q23-4Q23, Instagram hours engaged per day increased a whopping 24% YoY, per quarter, compared to Facebook (+8%), TikTok (+6%), Snapchat (+6%), and X (-10%)
SNAP shares plummeted 30% after missing 4Q23 top line expectations, citing the onset of the Middle East conflict as a material headwind to growth during the quarter. On a more positive note, Snap’s reported global DAUs in 4Q23 increased 10% YoY (+2% QoQ), directionally in line with ST mobile app DAUs for Snapchat (+11% YoY, +2% QoQ) in the same period
Snap announced a deal to officially publish highlights from Spotify’s podcasts onto its spotlight and stories features. Snap’s move to publish Spotify podcast content within its ecosystem could help spur higher levels of user engagement for Snap in the US given the high degree of over indexed interest by Snap users on Spotify. Per ST Audience Insights data, the share of US Snapchat users in 4Q23 using Spotify was 33% higher than the general population of smartphone users, demonstrating far greater levels of over indexed interest in Spotify vs its social media peers such as X (25%), TikTok (23%), Instagram (22%), and Facebook (10%). Should Snapchat successfully integrate Spotify podcast content into its user experience, the platform could experience growth in user engagement in key markets like North America

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