Shares of social media company Snap (SNAP +1.44%) popped on Monday after an internal note from company management to staff was unofficially made public. The memo from co-founder and CEO Evan Spiegel laid out Snap's goals for 2024, and the market liked what it saw. As of 1:03 p.m. ET, Snap stock was up 11.6%.
What does Snap expect for 2024?
As reported by The Verge, Spiegel just sent out a memo to Snap's employees regarding its goals in 2024. And some of these goals stand out. Management hopes to grow its full-year advertising revenue by 20% compared to 2023, it hopes to generate $500 million in revenue from sources outside of advertising, it's shooting for 14 million paying subscribers to Snapchat+ by the end of 2024, and it wants to generate positive free cash flow for the year.
NYSE: SNAP
Key Data Points
In its public filings, Snap doesn't break out its subscription revenue from its advertising revenue. But the company has generated roughly $2 billion in total revenue through the first two quarters of 2023. And with only 4 million Snapchat+ subscribers, it's safe to say that less than $100 million of that revenue was subscription-based.
Assuming Snap generates $4 billion in ad revenue in 2023, 20% growth would bring the total to $4.8 billion in ad revenue in 2024. If it hits its subscriber goal, then $500 million in subscription revenue is attainable, bringing the total to $5.3 billion. That's substantial upside from today, and it's why investors were excited with the memo.
What needs to change
When it comes to active users and ad impressions, Snap has continued to grow. But its revenue in the first half of 2023 was down 5% from the same period of 2022 because its ad rates have fallen. Many believe this is a problem not specific to Snap -- many advertising technology companies are struggling.
Therefore, to grow in 2024, Snap will need the global digital ad market to recover. On the surface, this seems to be a reasonable expectation. But it might not happen if major world economies slip into recessions.
