This article has been updated to include additional information.
Snapchat baffled everyone by turning down a $3 billion buyout offer from Facebook, hoping for higher valuation to come. The big question is whether (and how) the platform will be leveraging its 400 million daily snaps to generate revenue.
Needless to say, both the easiest and toughest answer is a three-letter word: ads. We explored this possibility with agencies and digital influencers at each end of the spectrum to find out what is really possible and how brands would be using Snapchat.
For the unfamiliar, Snapchat is a photo and video messaging app, unique in that it only allows each photo/video (snap) to live for 10 seconds before being deleted.
Snapchat recently launched its “stories” option, which prolongs the lifetime of the visual message to give users the ability to interlink it with other messages. The feature also allows recipients to view the material an unlimited number of times over 24 hours, before it disappears again.
Snapchat CEO Evan Spiegel reportedly said during a closed-door Goldman Sachs conference last week that around 70 percent of its users are women... or more precisely, girls -- teenage girls.
According to this chart by Marketing Charts based on Pew Research data, the main demographic using Snapchat is women, in high school/graduate school or less, aged 18 to 29. A Nielsen report released in June says 8 million of the users are 18 or older.
Over 400 million “snaps” are sent each day on the service – a figure first touted as greater than on Facebook, which was soon disproven, as the two relate in the way of apples and oranges -- they are not comparable.
Now enter the teams: Ad Believers vs Non-Believers.
Snapchat: Opening a New Era for Advertising
The space is rife with opportunities for advertisers.
The network does provide one of the largest emerging markets for pre-roll advertising in the digital space. Snapchat estimates that users receive approximately 400 million snaps per day; if even 5 percent of those snaps were preceded by a pre-roll ad, that would be 20 million available impressions per day.
"Assuming a recent TubeMogul study's numbers on mobile pre-roll, that would include a 52 percent ad completion rate. That is a solid inventory (with room for growth) for a company that is often maligned for having no available business model,” said Matt DeSimone, Senior Interactive Producer, at digital creative agency Click 3X.
Victor Pineiro, Strategy Director at Big Spaceship, sees intimacy as the driver behind Snapchat's success. He says, “Its one-to-one (or small groups) messaging makes each received Snap a bit of a gift, or whispered secret. You don't know who else received it, and you don't know if you're the only one to receive it. Because of this, it could facilitate a much more intimate form of communication between brands and their audiences.
Pineiro continues, "It also has spontaneity and playfulness built into it. Since you can't upload photos or videos to the app, you're forced to create spontaneous, on-the-fly content. The screen-drawing tool has created a culture of playfulness. Not only are you speaking to your audience more intimately, you're also speaking more casually and playfully.”
Hanna Park, a digital strategist at JWT, argues that Snapchat could be more content-driven than any other popular social medium. Interestingly, she highlights the psychological trigger that would work behind brand presence SnapChat: “The platform actually taps into FOMO (Fear Of Missing Out). You better subscribe to the brand to see it, and once you see it, it's gone. For example, if a retailer decided to advertise, they can get a celebrity or a band to blow a kiss to followers on Snapchat, and the instant sentiment/feeling of receiving that video on your phone is something that can't be replicated through Facebook, Twitter, etc. It feels more personal and private at the same time.”
Snapchat a Challenge, But Also an Opportunity
There's still a stigma Snapchat will have to outgrow associated with the fact that so many people used the platform for "sexting," points out Tom Buontempo, Chief Business Development Officer and co-founder, kbs+ Content Labs from kbs+ .
“Snapchat supports a real-time content creation approach, which is still difficult for larger brand marketing departments to support (due to infrastructure issues and risk concerns), but that's shifting every day," Buontempo added.
Pineiro at Big Spaceship argues that, “Until Snapchat allows for batch-sending of its Snaps, it essentially remains a platform for one-on-one, or small group communication. This is a massive paradigm shift for marketers, and it will require a lot of creativity and strategic thinking to find space for Snapchat in campaigns and ongoing social strategy.”
On analytics, kbs+'s Buontempo suggests, "At the moment, Snapchat dumps its user data, but deeper integration with other social APIs can solve for this.”
"Snapchat does not require much more than a username, email address, and phone number to sign up. That means the segmentation and analytics available to Twitter, Facebook, and other mobile applications are not available, since Snapchat is not given access to or collecting additional information for targeted advertising,” Click3X's DeSimone said.
From a client perspective, “...without metrics, it would be difficult to sell content ideas on the platform. Also, Snapchat skews young currently, which limits its usage to the target demographic of many brands,” JWT's Park added.
Which is exactly who everyone is trying to reach.
The challenge will be in nailing the language and the timing of the platform, explains Angela Natividad, social strategist and coeditor of AdVerve. "Teens use it regularly, but they also permit themselves a certain freedom that they normally wouldn't on other platforms. This means they're crasser and harsher, but it also means they're disarmed: open to spontaneity, open to being surprised and to opportunity," she says.
Natividad adds, "It isn't like older platforms, where they've already been jaded and have a sense of how brands target will target them there. It's the right time to jump, but you need to jump wisely and well. Luxury, for example, would have a hard time there.”
Why Some Believe Ads Are Not a Viable Snapchat Revenue Solution
Apart from highlighting the lack of data element, she argues that blasting ads, no matter how ephemeral they may be, would drive young users away, as it would denature their user experience. Something intimate can't support message broadcasting. And allowing such messages out there would require tweaking the platform's very essence.
For his part, Robert Scoble, social media maven and author of The Age of Context, calls for in-app sales rather than ads. “I really don't get how advertising is going to work in Snapchat. I wouldn't even go there if I owned Snapchat. I'd sell new features. I don't get what signal you will get with Snapchat that will make advertising possible beyond just demographic advertising,” he says.
He places great importance on user experience: “Snapchat has a problem: its brand promises impermanence. So if it starts showing contextual ads based on your photos, you are gonna be very pissed off. If I ran Snapchat I'd move very carefully.”
Click 3X's DeSimone echoes both Snow and Scoble, as far as not altering the very essence of the platform. “The main selling point of Snapchats is that they can only be opened, and viewed, once. If you move from the app during playback, the snap is gone forever. That eliminates the possibility of a traditional click-through without tweaks to the core user experience (threateningSnapchat's uniqueness), or a modified user path that may lead to lower engagement rates due to user inexperience and discomfort.”
Ideas for Concrete Use of Ads in Snapchat
How could ads succeed on the platform?
"Think of Snapchat as the ultimate platform for exclusive, behind-the-scenes content, sent only to superfans or VIPs. As the platform grows, we'll get a sense of how it plans to tackle more traditional advertising, if at all. For now, use it to break exclusive content, give fans a sneak peek of a product or event, or send funny, spontaneous Snaps to your most ardent fans,” suggests Pineiro at Big Spaceship.
David Armano, global strategy director in key accounts at Edelman Digital, takes it further: "Snapchat picks up where platforms like Twitter and Vine started. Brands on those platforms get their messages across in short bursts of communications and/or interactions. Snapchat ups the ante by daring brands to engage an audience in seconds and without a trace of evidence. It's the opposite of the long tail.”
Natividad provides a hands-on example and warns: “What agencies or brands already think they know about girls isn't going to help. I've seen how my sisters and her friends use Snapchat. It isn't always just flirting; it's also about grossing people out, photobombing, pranks, things they think are "lulz" funny — sort of dark-humour stuff that they feel comfortable sharing because they know these messages will disappear, and they're trying to outdo each other. So I wouldn't hop onto Snapchat and try targeting girls in the way I might target them on Pinterest, for example.”
Stay agile and keep experimenting, is what Matthew Cahill, director of analytics and insights at Havas Worldwide, recommends. "I don't think I would go into SnapChat -- or any emerging social network -- with the argument, 'here's how we're going to measure this and prove it's ROI positive.' Measurement within the channel is going to be soft and unstructured. I would recommend running a few surveys pre- and post- in target markets or demos to ask, 'Do you use snapchat?' 'Have you heard of this brand?' and 'What do you think of this brand?' Influencing awareness and perceptions would have to be the primary goal, but it would have to be exploratory in the beginning because there are no benchmarks.”
In short, his approach mirrors the nurturing methodology of Daina Middleton.
Guilaume Lelait, VP of North America, at Fetch, reminisces the beginnings of Twitter when brands were starting to think about to how to use it. But from an ad perspective, it's all about data and targeting, “we dont see how Snapchat can leverage any data to target customers accurately.” In his view, this medium is mostly adapted for fashion and apparel brands to give a sneak peek into new products. Karmaloop and Juicy Couture are already leveraging Snapchat, for instance. Taco Bell and Acura are also interesting examples who are already in the space. Preroll could be an option but the essence of the platform would be lost; coupons are not fathomable within the speed of disappearance of the diplayed media.
Taco Bell is one of the clients of the mobile ad agency born in london. Fetch does media planning and buying for brands such as eBay, hotels.com, Sony Music, Krispy Kreme, and many more.
So yes, as Business Insider said, if it plays its cards well, Snapchat is more than likely to “Make Money Even Though It Deletes The Most Important Asset It Has — Its Data.” I which case, the bet to wait for a better bid would pay off. The size of the exit is already massive in today's landscape, as shown on this Statista chart, based on Bloomberg info
Earlier in November, China’s Tencent made a bid to get its bite of Snapchat and is hoping to get onboard with the next round for the startup, which is likely, given its deep pockets and appetite for international expansion. Also, let's not forget that the Chinese visual messaging app is already an investor in its U.S. Counterpart, as Tencent was an undisclosed minority participant in the previous round.
But let's get back to Facebook
Only a few people remember but Facebook had launched something very similar on December 21 last year: it was called the Facebook Poke app, not to be mistaken with a simple poke on Facebook. Important distinction. While the simple poke had no value whatsoever, as Jeremiah Owyang, chief catalyst at Crowd Companies and Silicon Valley analyst at large explained, the Poke App had the premises of a good platform for a new kind of advertising. Alas, unlike Snapchat it didn't make it too far: version 1.0 was one and only, no iterations were ever made available.
In short, Facebook dropped that ball to focus on fine tuning other products such as their chat service, the new timeline design or Graph Search. No wonder it is now trying to get back into the game by attempting to acquire Snapchat. For instance, Instagram stepping up to the plate to reportedly introduce messaging on top of its visual shares might be Facebook’s response to Snapchat's “no.” If Instagram grows fast enough with the new feature, it could threaten Snapchat's expansion and, why not, grant Facebook the pleasure of acquiring it, at long last – maybe even with a lower price tag. Who knows?
What do you think?
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Liva Judic joined Search Engine Watch and ClickZ in May 2010 as a news blogger. She has lived and worked across the globe in Madagascar, Switzerland, London, NYC, Asia and is now based in between New York and Berlin.
Her background is in government relations and financial media where she started out as a journalist at Bloomberg and became senior editor at AFX news (now part of ThomsonReuters). Prior to forming her own consultancy Judic was head of international PR for a head of state.
Judic focuses on facilitating brand and marketing transitioning for European startups moving to the US. She has been named one of the Top 50 Industry Influencers of 2014 by AGBeat
March 19, 2014