Social Advertising Series: The Snapchat Story So Far…

Louis Huglin in Advertising

in Advertising

Back in February, ADTEKR looked at Snapchat’s imminent move into the adtech world. After its (very successful) recent round of funding, the mobile app needed to prove it could monetise its huge user base.

The approach, Snapchat claimed, was simple: a unique, non-intrusive, positive advertising experience that promised unprecedented user engagement. What looked to be the main issue was cost. Snapchat announced that it would charge advertisers a flat rate of $750,000 per day for a single 24 hour advertising feature; its publishing partners would also be able to command very high prices. Has this bold move paid off? Two months later, ADTEKR is back to analyse the story so far.

Snapchat’s Ad Model

Snapchat is a mobile-only application, and as such it needed to take a very different approach to other players in the social advertising space.

While Facebook, Twitter and Instagram supplement traditional bars and banners with sponsored, in-feed native ads, Snapchat’s model stays true to its ephemeral nature: professional-quality video content in the Discover feature that disappears after 24 hours. These are live events, not unlike analogue TV broadcasts in the days before VCRs. If you miss a Discover story, it’s gone and you won’t be able to see it again.

There are two advertising models operating side by side on Snapchat. The app sells space directly (at a premium), but also allows its publishers to sell space and to set their own rates.

USP: Audience

What Snapchat offers advertisers is unparalleled access to millenials. A recent Comscore study has found that a huge 71% of Snapchat’s US users are between the ages of 18 and 34. It’s rivals’ millennial reach pale in comparison: Tumblr has 53% in this age bracket, while Twitter and Facebook have 41% and 38% respectively. (The millennial user figures are actually likely to be skewed even more heavily in Snapchat’s favour, as the Comscore survey did not include under 18’s).

Millenials are consuming far less televisual content than any other audience group; Snapchat’s innovative model therefore gives advertisers a unique chance to access this demographic. The only sticking point for marketers looked to be the hefty price tag.

The Numbers: How has Snapchat’s alternative in-app advertising offering fared so far?

Discover ads are currently being priced at around $100 for every 1000 views – this rate is almost twice what a premium video publisher can expect to receive. So far, the average US publisher is taking around 10 cents a view for their ads on between 500,000 and 1,000,000 daily impressions. So Snapchat’s publishers are already recouping $50,000 to $100,000 per day.

There is a different revenue share model depending on who sells the ad. If a publisher sells the space, it can recoup 70%; if Snapchat sells the ad directly, the revenue is split 50/50.

An interesting development is that some publishers are starting to bundle Snapchat ad inventory with space on other platforms. According to Re/Code, ESPN are leading in this area and are already charging over $100,000 per day for Discover ads as part of larger bundles.

Marketers are being asked to fork out huge sums. This is high risk, high reward advertising. But they do have a safety net: Snapchat publishers are providing buyers with a guaranteed view volume based on recent traffic data. So far, where the viewing figures have fallen below the guaranteed level, Snapchat and its publishers have been extending the life of the content until it meets the guaranteed minimum, so that some advertisers are getting more than just 24 hours exposure.

The Discover format looks to have enabled Snapchat to convince advertisers just how effective the native mobile model can be, and that mobile advertising is fast becoming a significant component of marketing strategy.

What’s Next?

Over the past few years we’ve seen the young mobile adtech market take its first, tentative steps. Facebook, Twitter, Instagram, Tumblr and other social start-ups have brought some innovative new ideas to the market with their combination of traditional advertising and mobile in-feed models. Snapchat’s early success – and the huge amounts brands seem willing to spend to access it’s unique user base – might prove something of a watershed. Snapchat Discover, combining traditional live-event advertising with the latest in mobile adtech, might just be the winning advertising format mobile needs.

Social Advertising Series: The Snapchat Story So Far… was last modified: April 8th, 2015 by Louis Huglin