Snap Inc. (SNAP) Earnings Call Transcript & Summary

Good morning, good afternoon, good evening, wherever you are zooming in from. We are a happy day 3 of the Morgan Stanley 2021 Virtual TMT Conference. We are thrilled today for keynote to have Evan Spiegel, the founder and CEO of Snap. Evan, thank you so much for joining us. It's good to see you again.

Hey, Brian, it's great to see you. Thanks for having me. It's crazy to think that, I guess, what, a year ago, we were doing this in person, I think that was my last conference. So good to see you again. Thanks, thanks. It's great to be here.

Yes. It was -- it's amazing what a difference a year makes. Yes. It was sort of at the beginning of the end. And hopefully, [ knockout ] will be live again in San Francisco 1 year from now. So we'll do our best virtually. We'll try to match it. So before we get started, there's a lot to talk about in the ad markets and all the excitement around Snap. I do have to read all the disclosures. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures. If you have any questions, please feel free to reach out to your Morgan Stanley sales representative. Some of the statements made today by Snap may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by Snap are based on assumptions as of today, and Snap undertakes no obligation to update them. Please refer to Snap's Form 10-K for a discussion of the risk factors that may impact actual results.

Evan, thanks again for joining us. Here we are again It's a really exciting time for Snap coming off -- coming off the Analyst Day. You're in year 10 of the company. The business has been transformed a lot, which is part of what I want to talk with you about. 265 million daily active users, opening the App 30 times a day, 5 billion snaps created every day. How -- as you've sort of been through all of this now, talk to us about what excites you most of what you're seeing from a consumer behavior perspective on the platform?

Well, I think one of the biggest evolutions we've seen over the past couple of years has been the role that partners, developers and creators are playing on Snap. So if you think back to the early days of the company, the first 5 years or so, most of the products people used on Snapchat were just used with their friends. They send snaps back and forth or they watch stories created by their friends. And over the past few years, we've really evolved all these different parts of our business to provide a lot of value to our partners that also enhances the value for our community. So for example, with stories, we onboarded publisher partners, so that our community can learn more about the world around them or in our camera, we've built an augmented reality platform so that developers can build all sorts of incredible AR lenses using our Lens Studio tool and deploy them to our audience over 200 million of whom are using augmented reality every day. And when it comes to our communications platform, we've, of course, built Games and Minis, so developers can create all sorts of experiences that our community can use together. And so I think the big shift in evolution over the past couple of years with Snap is that our community is no longer just interacting with each other. They're interacting with all of these different developers and creators and businesses. And that's been really exciting because I think fundamentally, what we see is that each incremental new member of our community, each incremental new partner that onboards onto our service increases the value overall for all the people who use our products. So that shift to a real platform and increasing the number of stakeholders that are invested in Snap has probably been the most exciting evolution.

It's interesting. I think it's because you talk about a platform, and then you've also spoken about how you have 5 different screens, you want to make them more utility like. So I guess -- so help us understand, number one, what -- how are you and your head sort of evaluating how utility-like each of those offerings is? And what improvements do you need to make to really make them more utility-like and get more frequency of use, et cetera.

It's a great question. So the core of our business, this idea that you can communicate visually back and forth with your friends is a really, really powerful utility. And so much so that we see the young people prefer to communicate visually. They prefer to communicate with images rather than text. And so it's been a really powerful utility for staying close to friends and family. And that's driven a huge amount of engagement for us and obviously, very high rates of retention. So very early on, we learned the power of utility use cases. And really the growth and longevity they can drive for our business. And so as we've looked at building these new platforms, for example, our map, we've thought really hard about. What sort of value we can provide to our community that's really durable for them and makes their life better. And so our math, for example, shows you what your friends are up to. You can quickly tap and see actually what's happening because people post all these snaps all over the world. And just recently, we've added businesses to the map so that people can interact directly with businesses, whether they want to order or get directions or just go to their website, read reviews and things like that. And so we're slowly, over time, deepening the utility that people experience on the map. As it pertains to augmented reality, when we first got started with AR, it was all about just lowering the barrier to creativity for our communities. So if you wanted to take a selfie, but maybe you were uncomfortable with your current lighting, you could look like a bunny or something like that and send that as a snap. And people really enjoy doing that because it enhanced their communication. But what we found very quickly was that AR is capable of so much more. And so we've been building a lot of tools over the past few years to help people with things like AR, Trion and all sorts of new experiences, many of which are powered by Snap ML, which allows people to do really wild things with augmented reality. So as we look at each of our platforms, we're really inspired by our community and how they're using our different products, and that's how we try to evolve those products to further benefit them.

That's helpful. And I want to get into all the AR technology because you really have had a lot of leaps and bounds and AR advancement. But before we go there, I know Derek saw it, maybe -- Jeremy and Peter maybe may be listening. But one of the things that really stood out to me coming out of the Analyst Day was just the strength of the roster of people that you built around you now from Derek to Jeremy to Peter. It really -- the quality of the people around you really stood out at the Analyst Day, just understanding the industry, execution, et cetera. So my question for you around that is, one, how has this improved cast really accelerated the pace of overall innovation for the company and secondly, how has it you spend your time and sort of what you're focused on day and day out?

Well, I'd say the personal benefits have been tremendous because I get to spend a little more time with our family. But I think the thing that makes the team so outstanding beyond their individual talent and contributions, which are tremendous is really the way that they're all working together. And that, I think, is the thing that has made all the difference to really innovate and drive value for our community and our partners everyone has to work together really, really closely in a cross-functional way to make that possible. And so I think for me, the real highlight has been seeing not only how talented all of these leaders are, but the way that they support each other and work together. And that has been so important, especially over the past year with a lot of challenges, and I think everyone experiencing the pandemic personally in different ways to see our leaders really come together and support each other and support the business has been tremendous. And I think what that means for me is that I can go and focus more maybe on the areas where I add the most value around our product and around some of the long-term innovation that we're working on. When we took the business through these really big transitions around 2018, whether it was shifting to the self-serve ad platform or changing our leadership team or changing the core product and how it functions that really required like hour by hour, day-to-day management of the business to take a really big business through changes of that scale. And I think what's so exciting now is to have such a strong leadership team and the product in the business in a place where we can really look ahead and invest in the future. And that's obviously what we enjoy doing the most. And so it's just been really fun to work on all the incredible innovation that's coming over the next several years.

It's Great. And then -- and as the point of innovation, I think the other big announcement as part of the Analyst Day was the fact that you talked about 50% plus revenue growth for a few years. That's a big number. I guess my question is, given all the uncertainty that can go on in the advertising markets, what gives you confidence that you'll be able to sort of deliver on 50% plus growth over a 2- or 3-year period.

I think the fundamentals for us as we look at our business is really around the scale of our audience and the level of their engagement. And because we have so much engagement on our platform, we have a lot of advertising inventory and that abundance of inventory has meant that the price per impression, or CPM, is relatively low compared to other platforms. And so when we look at the market overall, and I think Snap reaches somewhere close to 50% of smartphones in the United States. And I think we have low single digits, maybe like 2% or something of the overall advertising market in the U.S. So I think when you look at it like that and you understand the depth of the engagement that we have and, of course, our ARPU relative to peer companies that are in the digital advertising space. That gives us a lot of confidence. Now of course, market conditions notwithstanding, that we'll be able to execute against those goals. And the reason why it was important for us to share that goal was that because we're investing a lot, of course, in the business to achieve those goals. And so I think people really need to understand the opportunity we see and the reason why we see that opportunity to be able to understand the level of investment that we're considering when we look at areas of opportunity like augmented reality or the Map and of course, our content business more recently, Spotlight. So I think trying to put that in context, help people understand really the opportunity ahead and, of course, our investments to get there.

That's helpful. I mean, I think as part of that investment, you also, at the Analyst Day, talked about how -- when you invest in new products and new platforms, you really want to now work to make sure that they're more difficult to replicate. Because as we know, throughout the online ecosystem and the social media ecosystem, there's a lot of copycats that go on. So I guess, what have been some of your key learnings about how to make products more difficult to replicate and really just make them more exclusive to Snap.

Well, one of our most important learnings has been the key difference between a feature and a platform. And so I think when you think about a product feature, oftentimes, the benefit that's derived by the community or the consumer does it increase as more and more consumers or more partners use that same feature. And that sort of feature is quite easy to replicate. What we have found is that over time, as we build more tools for developers and partners and help them reach our audience, and of course, they scale, for example, the number of lenses that they're creating to over 1.5 million lenses. That, I think, becomes a lot more difficult to replicate because not only do we have this very large audience engaging with those lenses every day, the developer community and those sorts of tools are increasingly challenging for competitors to copy. So I think the thing that we've learned over time and the reason why we focused on efforts like Snap Kit and our developer platform is that by providing our tools to the broader ecosystem of technology companies and businesses and helping them derive value from our platform, helps our company reach more people and become more embedded in people's lives. And so I think that's definitely how we've thought about over time, expanding from the product features that we create to really building these more robust platforms that benefit partners and benefit our community.

Got it. Understood. I want to sort get some of those individual features and platforms on the product. It starts with the camera, as you -- to your point, you open Snap, we start with the camera. And I remember a camera company. When we did the IPO. You've done so much from an augmented reality perspective lenses and landmarkers and local lens, you've done so much. I guess, a 2-part question. One, talk to us about sort of some of the key areas you need to execute on the next couple of years to continue to drive more and more user adoption and more engagement. And then help us out on monetization? Like what is your vision for the camera monetization over the next few years.

Well, I think it's really important to understand how powerful that camera is as a starting point. When Bobby and I were first working on Snapchat, we were in my dad's house. And Bobby had his vision that, oh my gosh, people use their camera, not once a week or once a month for a special occasion. But if they use their camera every day, 10 times a day that we could build a really big business. And that was really predicated on the belief that the camera was capable of so much more than just saving and recording important moments. And so we obviously started with communication, and that's become a really important daily use case for the camera. We evolved it into storytelling with stories, of course, into entertainment with Spotlight and the Map that allows you to see what's happening around the world in near real time. And so I think we're just at the beginning of showing how powerful the camera is. And that's why it's such a critical starting point that you open Snapchat into the camera. And perhaps the biggest opportunity of them all is with augmented reality inside the camera itself. And so as we look at augmented reality, we're focused on a couple of different things. One, we're improving the tools overall in Lens Studio to help developers make really compelling augmented reality experiences. We're trying to reduce the friction in using those tools, that will make it a lot easier overall to use these really complex tools to make compelling AR. And I think perhaps most importantly, figuring out how to connect the right lens experience with the right context in front of. So Snap knows about who you are, your preferences, who your friends are. And we also, through the camera, know what's happening around you. And so we can use that information to provide the most relevant lens experience, whether that's to learn about the world or just put a silly effect on your face, connecting all of that context with our lens platform is a really, really powerful opportunity for our camera. And so that, I think, is the way, ultimately, that brands and businesses are going to play a role in Snap because they now see the utility of augmented reality. Rather that's just through organic reach, building lenses on their own, adding them to their brand profile on Snap or through paid distribution. We really believe that over time, we can make sure we're always pairing the right lens with the right experience. And I think, for example, with a beauty company, that may be when folks are getting up in the morning and doing their makeup. Or if we're thinking about maybe a brand that specializes in soft drinks or something. When you're at the beach, providing an experience that reminds you of the refreshing beverage, I think, could be something that's really compelling for those businesses. So I think overall, the role of context and how smart the camera is and how much it knows about the world around you is what makes it such a compelling business opportunity over time.

That's right. It's -- you see to get the advertisers and the products in there, and you have so much data and context to show the ads that it should be able to scale, it will be exciting to watch. Let's talk about Discover a little bit. This is a product you launched it in 2015, had a lot of different types of video content on their premium content, unscripted shows, license content. And I thought the stat where you have 25 different channels that have a monthly audience of 20 million plus viewers is pretty impressive what you've built here. So I guess the question is philosophically, where are you now in sort of thinking about the video content that you want to grow on Discover to continue to drive more engagement? And then talk to us about where you are on international and sort of localization of Discover?

We've definitely identified a big opportunity in premium mobile content. There's a huge demand from our community for that style of content. And we've now gotten to a place where the business model is a win-win for everybody. So publishers can invest in building really compelling content and then monetize with Snap Ads or for premium content, they can monetize it with commercials. And so I think we have a very nice positive flywheel here where publishers are benefiting and our communities benefiting from really experiencing great content. And of course, for us, even though we invested in this 5 years ago or so, we really believe this is in line with where the mobile content industry is going overall. So you're seeing I think increased focus on payment to publishers for premium content and the importance of premium content to advertisers as well who want to appear in a brand-safe environment. And so I think that early discover investment in really building a premium content platform has paid off well for us. And what we've been able to do over time is really understand our audience, their demographics, their preferences, what sort of content they engage with and then use that to make bets on the type of content that we think will really do well on our platform. Of course, the majority of that is partnered, but we also create Snap Originals as well, which is a fun way for us to take bets on pretty interesting stories and to really tell them in a compelling way, specifically for mobile, where people are still, despite the maturity of mobile, not investing as much as we think we can in that premium content experience. So overall, we're really happy with the trajectory. We have a lot of work to do internationally. I mean there are many countries where we reach a very large percentage of the population. We actually don't have any local content provided by the partners in the country. So that's been a big focus of ours. That will be an increasing focus over the next couple of years. But if you go back to our sort of core business strategy, we always wanted to focus on markets like the United States and Western Europe, in particular, where the vast majority of the advertising revenue is located. And now that we have significant momentum and a lot of reach in those core markets, we're able to reinvest a lot of that into growing and expanding more internationally. So I would say, we've got a lot of work to do there, but it's a really big opportunity.

That's helpful. And on Discover, again, it's interesting. I'm not looking for any specific math, sort of things like philosophic, how you think about it because it's a premium video offering, more brand-safe. We see some other premium online video products, monetizing and advertising being very high with Roku, Hulu, YouTube, et cetera. As you're sort of thinking through the Discover monetization potential versus Stories, just how do you think about that long term? Is Discover a higher, lower, similar to Stories? Like what are sort of the puts and takes around Discover's monetization potential?

Well, I think the important thing to understand when it comes to advertising is that advertisers are really considering those value they derive from their investments. And they define that value differently. So some advertisers want people to take a really specific action after watching their video advertising ad. And we, of course, optimize against that to try to improve conversion. And many other advertisers care, for example, about content adjacency or they want to market against a very specific type of show. And so I think the really great thing about our video platform is that it offers advertisers a lot of choice about where their advertisements appear and what they want to optimize against. And with things like Spotlight that open up even more brand-safe inventory, I think that's a really exciting place for brands to think about, especially as they tweak their own creative for that specific environment. So I think, ultimately the overall opportunity for our business is really going to be defined by how good we are at delivering that advertiser value. And really less, I guess, maybe around CPMs because I think the magic of these businesses and really the incredible advancements in machine learning have shown us that you can actually increase advertiser value while you simultaneously increase CPM. And so as you look at our video advertising platform, that's really what we're focused on. And of course, in our auction, there's a clearing price for premium video and for brands that want adjacency to the ultra-premium content. And there are going to be other brands that are optimizing around different things, whether that's an app download or a subscription or some other form of conversion to their website or e-commerce shop. And so that's really how we think about the value of our video advertising inventory.

That's helpful. I thought Peter's presentation on the flywheel around -- the prices go down, the ROI goes up. It was very clear. It should be a required viewing for any investor in online advertising, I would argue. So I think that's really clear. It's just part of the opportunity. You mentioned Spotlight as another emerging use case, 100 million monthly active users despite it only being out for a few months now. This sort of goes back to one of my earlier questions on how you keep products differentiated? There's a lot of similar products to Spotlight out there. How do you sort of see yourself positioning Spotlight, so it stays differentiated both for content creators as well as users and advertisers?

It's a great question. I think at the heart of differentiation for Spotlight will be our creative tools in our camera. That's really where we saw a strategic advantage to building our own entertainment platform because what we saw was that people who are capturing snaps were distributing them on other platforms. So the snaps would go viral on TikTok or viral on Instagram or viral on Twitter, and we didn't have a platform within Snapchat where those same snaps could go viral and reach a really big audience. And the reason why we hadn't built that is because we were very worried about how that could impact our values when it comes to our platform, and we were concerned about our ability to moderate the scale of a platform like that effectively to create an environment that's positive and constructive for our community. So we thought a lot about it. We experimented a lot. We don't allow public comments and things like that. We moderate the content that appears on Spotlight, but we get the benefit of all the amazing creativity. The 5 billion snaps created every single day that people can then submit to Spotlight. And I think one of the things that's been unique about our experience with Spotlight is that you don't have to be famous. You don't have to be an influencer to be rewarded for your creativity. If you just make a funny video then add it to Spotlight, if it goes viral, you can end up earning a share of over $1 million that we distribute every single day. And so it's just been so fun to see all this incredible creativity on our platform, all the snaps that might have gone viral somewhere else now have a home inside of Snapchat. And I think that's been a great opportunity for creators, but also for our community who really enjoy seeing all of these fun snaps. So it's only a few months into Spotlight. We haven't really had an opportunity to innovate meaningfully on top of sort of that core rough sketch of the product, as we might describe it today. But despite that, we've got a lot of momentum in terms of the usage and over 100 million people using the service every month. So a good foundation to build on, and we really have a strategic advantage with our camera and the number of people creating snaps every day.

It's helpful. The -- again, it opens with the camera. It all starts with the camera. It's good context. So I wanted to ask you about some of the more emerging and earlier use cases around Maps and Games and Minis. So maybe starting with Maps, I guess, maybe not that early, 250 million monthly active users, 35 million businesses on the Map. I guess, as you sort of see the product road map for the Map, talk to us about where have you made the most progress in bringing on more SMBs and eventually monetizing it versus what do you sort of see as being the heaviest lift to still come to monetize the Map over time?

Let's say the most exciting thing for us is that we've been able to change people's perspective on the role that maps play. So historically, on your phone, maps are really used for getting from point A to point B. And they aren't really use as much for experience and exploration. And so I think the thing that's really exciting about our Map is that people come to our map to explore to see what's interesting around them to see what their friends are up to. And so that's the biggest shift, I think, for us and probably reflects a shift in mapping overall, especially as young people forgo their own cars to take an Uber, the point A to point B directions are just less relevant for our community. And so I think our ability to shift the core use case of the map to one that's really exploratory is really exciting. I will say the pandemic has been challenging in terms of mass engagement overall because people aren't out and about with their friends. They're not going and hanging out. And so best features of our map haven't been as valuable or interesting over the past year. So it's really been a year that we've been focused on the underlying infrastructure so that we're ready when people leave their house and hang out with their friends again, that we're able to provide that value. So for example, showing you the places around you that are popular with your friends or people like you. It's something that's unique to Snap and our social graph and what we can provide because people share their location with one another. Of course, changing the way that the map looks based on the places that are important to you. So when you open the map, it really has your personal landmarks. And the way you see the world rather than just the same math that everybody has and shares. And so I think the next year or so will really be about learning what happens as people use these new products. Of course, I mentioned we've added 35 million places to the Map as they use these new products, and we build more engagement around really the core value that we think the Map can drive. And then over time, as we look at how we engage with businesses, I think one of the obvious opportunities is to just start by providing more insights to businesses, helping them understand what traffic looks like for their business over time, what their customer demographics are like? How to think about acquiring more of those customers? We can provide a lot of organic value for businesses today based on our insights from the Snap Map. And I think that's a really important way to get started. So the businesses can just see that people are engaging with them every day through the Snap Map. And we believe, over time, that can help effectively be lead gen for local advertising.

And you already have some partnerships around food delivery and restaurant and reservations on there. So any early learnings about behavior change of your users there? And then secondly, how do you think about augmented reality sort of fitting into the Map over time?

Yes. I think the delivery use case, for example, it's interesting, but I'm not sure it gets at the core value of the Map, which is why I sort of suggested that it will be fun to see what people do when the world really opens up more meaningfully. And of course, in some pockets, we can see that in different geographies and whatnot. So providing more actions so that people can say places that are important to them or get directions, which we offer today, read reviews and things like that. I think that will be very important going forward. And then we're very excited about the ability to connect augmented reality experiences to the Map. One of our primary focus is today has been really trying to build all the underlying infrastructure so that in different locations around the world, we actually map the 3D environment and are able to overlay AR experiences very precisely on the Map and have people share those experiences together. So the map can be a really interesting jumping off point for those sorts of shared AR experiences that are localized in the world around you. And again, something that we think will be a lot more compelling when people are out of the house.

Yes. Be sooner than later. For now, we are in the house playing games, which has 35 million monthly users now. And you mentioned how you're testing commercial ads and you're testing some tokens in it. I guess, so on the games front, the last couple of years, what has sort of excited you most about the progress you've made on games? What do you think is sort of the biggest barrier you have to sort of overcome the next couple of years to keep the games business growing? And talk to us just about philosophically about continuing to partner with game developers as opposed to making gaming content in-house?

Let's say, we're at a really exciting turning point for the gaming platform. As we build platforms, looking back at, for example, how we built our content business. We start with a really small number of partners, our own -- sort of owned and operated channels. And our primary goal is just to learn as much as humanly possible about what our community likes doing, how we can better serve our partners. And we just iterate and iterate and iterate with a very small group of partners to really help them find success quickly. I think what's been exciting in the past years to see the evolution to a business model that really works, where partners can become profitable very quickly after launching their games. Where they can reach a big audience and, of course, monetize with premium advertising units. And we're starting to experiment with things like tokens, which will provide another avenue for monetization. So I think for us, we found, I think, a platform that provides a lot of value to our community, and people really enjoy playing games together. We're sort of halfway through the monetization story for developers in particular. So they can see it as a really worthwhile investment the same way that publishers do, and we can provide a lot of insight on the types of games, the types of gaming experiences to audience, so that they can develop the most relevant content for our community. So I think we're probably halfway through that sort of process. But really excited about what we're seeing. We paid out a lot more revenue, for example, this year than the prior year based on the engagement that people have in these games. And so that makes it, I think, a really compelling way to get a lot of distribution to a large audience and monetize, which is what game developers are really looking for on mobile. So that's definitely been an exciting step forward, and we're really thrilled by the progress there. And of course, all the infrastructure we built for our gaming platform also is the underlying infrastructure for Minis, which we can talk about as well.

Yes. And I guess on games, though, so still sticking to the partner development model as opposed to thinking about going in-house and starting to make games for now?

Yes. We've seen a lot of success across our business really with these win-win-win partnerships, where Snap doesn't have to be a great games publisher. Snap doesn't have to build the best AR experiences. We can build the tools to empower our community and our business partners to do that. And ultimately, that results in a lot faster iteration, experimentation. And of course, helps other people build their businesses and become more invested in Snap.

That makes sense. On Minis. Does that have a pretty unique functionality that you've been sort of experimenting with and testing and now rolling out booking movie tickets, integrating to dating apps, et cetera? Maybe I just love sort of a glimpse beneath the hood of what is your blue sky vision for Minis a couple of years from now that you really hope the company can move toward? And what are the most challenging parts you have to execute on to get there?

Well, I guess the big opportunity that we identified are the shared utilities that friends can use together. And so Snap, obviously, is based on very close friendships that people have. And people do -- of course, they talk to their close friends all the time, but they also do things with their close friends all the time. And we really see Minis as an opportunity to empower all those different experiences. So whether it's booking a movie ticket and choosing seats next to each other, you can do it at the same time and check out. Or in the future or maybe other ways of shopping together, maybe around more physical goods, e-commerce, those sorts of things. That's something that's really hard to power today in your sort of traditional siloed app experience because both people have to download the app. It takes a long time. You got to register, find each other, all this stuff. So you don't get all the benefits of using these services together with your friends. And so with Minis using the same underlying architecture as our gaming platform, we've been able to experiment with all sorts of different experiences. I guess, if you really think blue sky over the next 5 or 10 years, we think Minis can really remove a lot of the friction that comes with conversions. So meaning today, if you're an advertiser, you're running an ad for a new pair of shoes on Snap. Someone has to basically leave Snap, go to your website, go through a whole checkout flow and all of that. And we really see Minis as a way to maybe remove some of that friction, immediately launch a Minis experience, help streamline all the payments and checkout flow, and that's something that could provide a lot of value to advertisers. So that's a way that we're experimenting a little bit today. But we've really started with this differentiated use case of being able to use Minis together with your friends.

Got it. Okay. Now let's watch that evolve. It's exciting to watch all the new Mini options evolve. I have a couple on users and sort of engagement. The first one is, you've all these new use cases on the platform between the core stories and Discover, which is doing very well, Spotlight, Maps, et cetera. What can you tell us about total time spent per user per day on the platform. Is it still growing in aggregate? Or are you seeing sort of minutes shifting around between the use cases? I think you're on mute.

Sorry. I guess at a high level, it's important to understand the way that we optimize around time spent. So for example, that's a really important metric for our content business. So for Discover, for example, I think time spend grew like gosh, more than 20% year-over-year for 2020. If we look at Spotlight, the month-over-month time spend growth from January to February, was like 55%. So we're very focused on our content business on tracking the growth of time spent because that does relate to the overall opportunity for video advertising. When it comes to our map or communication or the camera, we're really optimized around efficiency. And so a lot of our goals, for example, with the camera around actually how quickly can you take a snap. If you have to sit there and wait for the app to load, that's a real problem for us. So how quickly can you take a snap and send it to your friend? How quickly can you find the right lens with the map? How quickly can you find a relevant business and engage with a chat, of course, the same thing. And so we've invested a huge amount of our engineering resources and effort into improving efficiency for huge parts of the platform where we don't see a time spend is like the North Star metric. And I guess maybe coming back at a high level, as we look at like aggregates, the other thing that's important to understand is that as new users join the platform, it takes time for their engagement to ramp. And their engagement also differs depending on what platform they're on. So Android versus iOS and whether or not they have access to our full content offering. And so as you look at us accelerating our user growth, for example, in the rest of the world, I think that will put basically pressure on the aggregate numbers, which is why we're trying to help people understand the core -- these core businesses like Discover and Spotlight, understanding the core drivers of those businesses because that's where time spent is really important to the overall opportunity for our business. Whereas we actually like to see increasing user growth internationally because over the very long term, that will be a big opportunity for us even if it puts short-term pressure on aggregate time spent.

Makes sense, of course, it's aging well. It was a very good Discover and Spotlight engagement numbers. That's helpful. On the user front, one of the most common questions that I get is -- from investors is around when you think about forward North America and European user growth, you're relatively more penetrated there in the core 13 to 24-year old demo. So I guess a couple of questions here are. Number one, talk to us about strategies you have in place to sort of continue to age up, to add more whole people like me to the platform? And then secondly, that 50% forward growth that you talked about. How much of that is predicated on user growth in the U.S. or in Europe?

Well, I guess at a high level, the 50% number actually isn't predicated on any further user growth or any engagement growth. So that's just looking at like the steady state opportunity, actually, in terms of our inventory on our core platforms like our AR business and with content. And so again, I think if you just look in the context of our -- the scale of our audience and the overall sort of ARPU opportunity, we feel good about our ability to execute against that goal in a good operating environment. So that's something that we're excited about. Looking specifically at user growth in the U.S. and Europe, our strategy has always been to focus on acquiring incremental new user that's really in our demographic. And then deepening their engagement and, of course, making sure they retain at a high level over a long period of time. And that's how we've grown our business over the last 10 years. And as you mentioned meaningfully expanded the audience. I think I touched on earlier, almost 1 out of every 2, we reach 1 of every -- nearly 1 of every 2 smartphones in the United States. So I think with that very focused strategy, really playing to our strengths and focusing on consumers that want the latest and greatest technology products. They really want to explore new ways of communicating with their friends or hanging out with their friends by -- on our map or with our augmented reality experiences. I think that's really been core to how we've thought about our business, and it's really allowed us to drive our growth through product innovation because we're constantly talking to a community that's really open to trying new things. So that strategy has worked well for us. I will say there is -- we do see some upside opportunity particularly, in things like content and are making sure we have relevant experiences for different demographics. And so what we're able to do is basically look at usage of those products, break it out by demographic, region, et cetera, see where we have gaps and then just invest specifically in content that's relevant for those demographics. And so I think that's an important way that we retain folks as they age up to make sure they have an experience that feels relevant for them. But I'd say, overall, our strategy does remain focused on making sure that we're continuing to innovate and attract each incremental new member of our community.

Got it. Okay. It's good context. On the international side, I thought the India case study at Investor Day was quite helpful to sort of understanding the go-to-market in android rebuild, localization, those both matter. Maybe just talk to us about the investments you need to make and the technologies that you want to see roll out to new international markets to sort of bring new users on the platform. In which countries or areas of the globe do you see being the biggest contributors to rest of world user growth the next few years?

Well, Asia is a big opportunity overall with billions of people and a lot of young people, which is something that's really exciting for us. Now we're talking about countries where the majority of people are actually under the age of 35. So I think that does represent a huge opportunity for our business, and it's really a demographic where our product resonates a lot. So we have been focused on that. I'd say a lot of the underlying technology platform improvements have been made over the past couple of years and really culminated towards the end of last year, when we rolled out our totally rearchitected messaging infrastructure, which makes it a lot easier and faster to use, our core product to communicate visually with your friends, no matter where you are in the world. So that's been a really important innovation and improvement for the product and for the community. So I'd say that really means our focus now is on relevant content, relevant augmented reality experiences, making sure, for example, that our map really reflects the businesses that are in these different geographies, which is more difficult than you might expect to make sure we have all the points of interest in a given geography. So trying to find the right partners to collaborate with on that. So in general, I think what we've seen now is that the structure of our application has very widespread appeal, no matter the geography, but we do need to personalize and customize the content inside the application to make it relevant for our different customers.

Understood. I have 2 more for you. One on sort of capital returns and sort of -- it goes back to us a year ago at the conference then also the Analyst Day. And then one just sort of on that one last big picture one. So on the capital return and sort of the way to think about share count and managing stock-based compensation, I thought the message was pretty clear at the Analyst Day, but just for everyone who's zoomed and I have it twice, even in the queue here just talk to us through philosophic, how you guys are thinking about managing dilution and share count and capital returns over time.

Certainly been a big priority for us. It's a lot easier now with the stock at $60 instead of $4.99 or whatever it was. So I think we're on a pretty good path here in terms of stock-based compensation. We rearchitected some of our compensation plans recently. So it's a big priority for us. And of course, we're well on the way to being free cash flow generative. So we look forward to that milestone in the future, which I think will, again, help us manage dilution. So I think the business is at an exciting inflection point with our first full year of adjusted EBITDA profitability last year. And we're just going to focus on maintaining that momentum. But as we've said, really investing in the future. So I think the team has done a really good job getting that balance right because they see these really big opportunities in front of us. And at the same time, we've really made a commitment to making progress towards free cash flow and, of course, on dilution management as well.

Got it. That's helpful. Last one I had for you is on investment. And you mentioned it a little bit earlier about the 50% forward growth you're going to invest. There's a lot of opportunities to invest in to grow the platform. So maybe just a couple here. Just talk to a sort of big picture about the 1, 2 or 3 key areas where you really want to increase your investment to drive more durable growth? And then the second one, about the revenue outlook, the user outlook is helpful. Are there entering other -- any other KPIs that you want investors and people externally to be able to ask you about, not quarterly, but maybe annually that you're really focused on just to make sure that you're getting return out of your investments?

Well, I guess, as we look at the future, some of the obvious near-term opportunities are really around engineering investments in our platform and in our products. Of course, the expansion of our global team. As I mentioned, there are many countries around the world where, in some cases, we reach the majority of the population, but we have a single-digit number of folks on the ground actually serving that geography. So we've got a long way to go to become a global company, and that's going to be a big focus of ours over the coming years. And then I think there's still a ton of opportunity here in the United States to improve our vertical coverage with our advertisers. There's still a huge number of advertisers where we aren't providing the level of service we'd like to. We're not a deeply integrated business partner in the way that we have for some other businesses and advertisers. So I think that is going to be a big focus area of ours as we sort of evolve from being in these test budgets to really meaningful always on partners. So that's definitely a priority. I think just looking at KPIs, if you look at the history of our business, the way that we've been able to continue to grow is really through product innovation. And so I think the investors that have followed us for a really long time from the founding of the company, I think that's always what they've been deeply engaged on. How are we thinking about innovating? How are we serving our community? What opportunities do we see to continue improving the product? And what's that long-term vision and road map. And so we touched on some of our focus areas today, but I think this is a business that's really succeeded by serving its community through innovation, and that's what we've got our laser focus on.

Great. All right. Well, we can't wait to see all the innovation to come. Evan, thank you so much as always. So it's great to catch in and can't wait to see the results for the rest of the year.

Awesome. Thanks so much. I really appreciate it.

Thanks, everyone. Thanks, Evan.