Snapchat has declared it expects to be a one-billion dollar company in 18 months. And its superstar investment-banker Chief Strategy Officer, Imran Khan, finally revealed how it will reach those goals—which are lofty, considering the company made only $59 million in 2015.
An enormous expansion of its advertising offerings is fueling Snapchat’s confidence, detailed in a deluge of announcements made Monday in a feature story in Adweek.
First and foremost, Snapchat will be launching its advertising API (application programming interface) called Snapchat Partners. For the first time, third-party advertising technology startups will be able to sell Snapchat’s ad inventory using an automated, auction-based system. This is the same system Facebook, Twitter and Instagram all use—however like Instagram once did, Snapchat will begin by inspecting every potential ad itself for quality.
Perhaps more importantly for Snapchatters is the fact that video ads will now appear between their friends’ Stories. Translation: as you flick through photos and videos from friends, you will soon be seeing messages from Snapchat’s advertising partners.
However, Snapchat has promised not to overwhelm users with marketing messages, using the reasoning that ads begin to lose effectiveness as they increase in number. Snapchat will begin testing Snap Ads Between Stories with ten test partners including Universal Pictures, Paramount Pictures, Verizon, Procter & Gamble, Warner Bros. and Express.
This still may sound a bit fishy, especially when considering the very word Snapchat CEO Evan Spiegel used to describe the torrent of personally targeted ads seen on other social networks: creepy.
Snapchat currently offers targeting based on location, gender, wireless carrier, device type and content affinity. While that may sound like a lot to the average Snapchatter, it leaves some marketers wondering if more advanced targeting akin to Facebook’s interest-level targeting will ever materialize.
This is because it’s that same “creepy” interest-level targeting that allows for successful digital advertising by sites like Facebook and Google. Snapchat will have to find a balance between the two extremes if it is to lure the minds of marketers at scale.
Snapchat has also employed Measurement Partners like Moat and Google Doubleclick to weigh a campaign’s effectiveness for advertising partners. Snapchat specifically partnered with Moat to create an ad performance score. It generates a quality score from 0 to 100 based upon calculations of screen real estate (Snap Ads—formerly 3V or Vertical Video Ads—are full-screen) and time exposed to video and audio. It may be used in the future to determine how advertisers pay for Snapchat impressions, but not quite yet.
Snapchat is taking audio seriously in measuring effectiveness of ads because it believes it has serious value. Unlike Facebook, Snapchat’s default audio setting is ‘on.’ And it may have a point: two-thirds of users watch Snapchat videos with sound. Snapchat believes audio elicits a greater emotional response to it’s ads when it’s turned on—and that its those responses which lead to greater purchase intent.
A recent study by Snapchat and MediaScience asked 320 consumers between ages 16-56 during 552 sessions to compare Snapchat video ads to those on TV, Facebook, Instagram and YouTube. The study used biometric testing to capture emotional responses, as well as eye-tracking and exit surveys.
Results revealed users found Snapchat ads attracted twice the amount of visual attention of Facebook, 1.5 times more than Instagram and three times more than YouTube. Snapchat also claims its ads generate more emotional response than any other platform (including TV). Most importantly, the study finds Snapchat video ads double the lift in purchase intent compared to the other ad formats.
Snapchat has also built an internal team to measure the effectiveness of ads, sponsored Geofilters and sponsored Lenses for retail partners called Snapchat to Store. Advertisers with brick-and-mortar stores will receive statistics revealing whether its ads actually lead users into the store—which is an undeniably alluring metric of effectiveness.
Snapchat’s foray into large-scale advertising isn’t surprising. It’s already surpassed Twitter’s user base at 150 million daily users. However, it can’t claim success just yet. The company’s user base needs to keep growing in order for it to attract those advertisers and ultimately reach its goals. But the irresistible nature of its current youthful user base is hard to deny. Snapchat reaches 41 percent of 18- to 34-year-olds in the U.S. on any given day and it’s already downloaded on 62 percent of 13- to 24-year-old’s phones.
They’ve laid out their plan. Now, it’s only a matter of time before we see if Snapchat is a billion-dollar company after all.
Mackenzie Mennucci, Content Specialist & Social Community Manager