Snapchat emerged as a dark horse in the world of social media, and it has come a long way since its controversial "sexting" days. According to the company, 150 million people use Snapchat every day, and they spend an average of 25-30 minutes watching a collective 10 billion videos.
For a long time, the company sat on such data and focused on creating a unique experience for its youthful user base (60% are under the age of 25), while limiting options for marketers and being incredibly selective in which brands it allowed to advertise on it platform.
However, to stay competitive post-IPO, Snap needs to not only maintain and grow its user base but also convince marketers of the value of advertising on the platform.
Leading up to its IPO at the end of 2016, Snapchat increased accessibility and options for marketers. That effort was likely fueled by other social media giants—notably Facebook, which also owns Instagram—creating similar versions of the app on their own platform. Facebook Stories has had a lackluster initial reception, but Instagram Stories is threatening Snapchat's dominance; as of mid-April 2017, it surpassed Snapchat in active daily users.
Marketing Capabilities Added in 2016 and Early 2017
Snapchat tested and rolled out several ad features leading up to the IPO, despite making it clear to investors that the platform may never be profitable. In addition to its Discover feature, where selected brands publish new content daily that is tailored to the platform, Snapchat now offers targeted ad offerings (including behavioral ads), mid-roll ads, and sponsored geofilters and lenses. It also opened its API to select partners in the fall, and it is experimenting with ways to advertise using its Spectacles product.
In early May 2017, Snap launched a new self-service product called Snapchat Ad Manager that lets marketers buy any of Snap's ad formats, including videos, and target them to certain groups of users. Ad Manager expands the advertising pool to a broader base of small to midsize companies.
Leading marketing industry experts are hoping that the IPO, and the increased options for marketers, will create a more competitive digital media landscape. At this year's Mobile World Congress, WPP CEO Martin Sorrell said he thinks Snapchat has the potential to be the third major player competing with Google and Facebook for digital advertising, although it still has a long way to go.
How Snap Can Differentiate Itself
Snap Inc. stock has dropped following poor earnings reports, but it has the potential to rebound if the company plays it cards right. As CEO Evan Spiegel laid out in the IPO language, Snap is keen to differentiate itself from the top social networks through its decision to brand itself as a camera company.
Unlike other social networks, instead of focusing on a curated user feed... the app opens immediately to the camera; thus, the business takes advantage of the central role of the camera, and therefore video, on a smartphone more so than other social media companies. Its Spectacles product also indicates that the company has bigger plans than just being an ephemeral-photo sharing app.
With its unique user interface, "hip" reputation, and exclusive marketing status, Snap has an opportunity to truly distance itself from the social media network category it has been pegged into, and offer some very different options to marketers. For example:
- Augmented reality (AR). Snap is already dabbling in AR marketing with its sponsored geofilters and lenses. However, as Pokémon Go has demonstrated, AR features that incorporate a users' surroundings are just as addictive as ones that overlay on your face. Offering AR-based marketing features also allows brands to reach potential customers without needing to purchase additional hardware or gadgets (as with virtual reality), and allow for location-based promotions.
- In-app purchasing. Pinterest is already experimenting with this, but another value-add Snapchat could incorporate is the option to buy a product in-app (or be taken to another app or site to complete a purchase). Imagine watching a celebrity's Snapchat story and wanting to buy the shirt she's wearing: Simply swipe up and be directed to a purchasing page. However, this function would require Snap to partner with other platforms (for payment), something it hasn't done a lot of so far.
- Sports. Live sporting events are one of the last areas of television that hasn't been decimated by streaming services but, rather, been supplemented by them. Sports viewers are not only watching the game on the big screen but also checking score updates and stats on their phones or joining the conversation and sharing photos on social media. Snap can capitalize on this multiscreen viewing experience by offering advertising options around major sporting events—either as the primary viewing screen through which fans watch the game, or as the secondary viewing screen that's augmenting the experience.
- Spectacles and other hardware. While Spectacles is still a new product, Snap has managed to avoid the hype and subsequent disappointment of Google Glass thus far. It's a real challenge to get hardware to catch on with the masses, but if Snap can achieve it, it should have unique advertising options planned ahead of time.
Ultimately, no matter what avenue it goes down, Snap needs to diversify its options for marketers and ensure that they're scalable. It also needs to stay vigilant, and recognize the real threat it faces from Facebook and Instagram. If it can conquer those two hurdles, Snap has the potential to draw in major advertising revenue through unique channels.
