The Rise of Snapchat: Can its Ad Platform Stand Up to Competitors?

As Snapchat’s parent company, Snap Inc., prepares to go public in what could be the second-largest IPO ever for a social media company, industry chatter surrounding the success of the launch has been mixed. This is partly due to a lack of awareness of the platform from older generations, as 85% of all monthly Snapchat users are between the ages of 13 and 34. But there is another important factor at play here too – advertising.

Snap Inc. currently offers three types of ads: video ads, sponsored geofilters, and sponsored lenses.

  • Video ads appear between “stories,” which are images and videos posted by users, and in between content generated by major brands like Time, ESPN, and Cosmopolitan in the platform’s “Discover” feature.
  • Sponsored geofilters are image and video overlays which a user can place over their snap for a fixed amount of time.
  • Sponsored lenses are interactive “faces” that users can apply to their snaps. Users can turn themselves into a dog, Santa Claus, and even a taco (shout out to Taco Bell) with just the swipe of a finger.
Courtesy of Snapchat Internal Data

Courtesy of Snapchat Internal Data

However, advertisers didn’t always have the ability to select from a variety of ad types. Until recently, Snap Inc. only offered ads that were effectively print display ads, and were charged at a fixed price for each ad slot.

In 2015, Evan Spiegel discussed his dislike of data-driven advertising products and stated that he didn’t want Snapchat to be “creepy” in how remarketing campaigns serve ads of a product that consumers previously viewed. The company faced criticism by some for “trying to thread the needle a bit too thin,” and not embracing the potential success of using big data that other similar companies, like Facebook, have seen.

Facebook’s advertising platform has been extremely successful in using a bidding system where any size advertiser can target and optimize their own ads. In fact, in 2015, Facebook accounted for more than 13% of all digital advertising revenue.

In recent months, Snap Inc. has taken strides to move closer to its competitors. In December 2016, Snap Inc. announced that it was rolling out “Goal-Based Bidding (GBB),” which allows advertisers to select a goal to increase swipe-ups to learn more information about what the ad is offering instead of focusing solely on impressions, as Snap Inc. has done in the past. Advertisers can then select a bid for each swipe, and Snap will auto-optimize delivery and bidding to a target audience. However, GBB campaigns are still charged on a cost-per-impression (CPM) basis. According to an article in AdWeek, view time and efficiency have both increased in the first month of GBB’s release.

In January 2017, Snap Inc. decided to use third-party data in its ad targeting. It partnered with Oracle Data Cloud to enable marketers to use offline purchasing data to target users with potentially more relevant ads. In addition to tighter targeting, the deal will also allow for better tracking of sales conversions.

As Snap Inc. continues to evolve, its success hinges on the advertising decisions it makes. The potential success of Snapchat’s ad platform could be a significant factor in whether its IPO is strong or a disappointment.

*Header image courtesy of Wired.