Snapchat must hit more angles with advertisers
Marketers spending heavily on social media, but Snapchat may have limited appeal
Advertisers are flocking to social media to reach its users with pictures rather than words. It seems they prefer a wide lens.
A recent RBC advertising survey found 95% of advertising professionals say they are spending on social platforms, with 54% of those allocating more than 20% of their marketing budget to the category—a record high across the past 14 semiannual surveys performed by the firm. Unfortunately, not all canvases had the same appeal.
RBC’s survey showed that while future spending intentions on Snapchat improved in September versus April, Snapchat spending remained the weakest of all surveyed platforms.
These included the likes of Facebook, Instagram, Twitter, YouTube and Pinterest. In fact, 76% of all ad professionals surveyed said they didn’t advertise on the Snapchat platform.
Snapchat has had fantastic success with younger users, with 75% of13 to 34-year-olds in the U.S. now active on the platform, according to the company. However, speaking to a group of investors on Wednesday at Goldman Sachs’ annual “Communacopia” conference in New York, Snap Inc. Chief Executive Evan Spiegel said strength in his company’s core demographic “can actually work against us” when it comes to advertisers.
Because the largest segment of Snap’s users are young, older brand executives don’t necessarily use Snapchat frequently, he said, if ever. This can mean that they don’t understand the platform and, therefore, may not see the value in advertising there.
Snap has been working to combat friction between its platform and advertisers to boost sales. The company said it launched a self-service-ads platform in 2017, which has helped. Earlier this year, Snap rolled out Instant Create, which enables advertisers to make ads in three steps. In April, Snap announced a partnership with e-commerce tech company Shopify, allowing merchants to purchase Snapchat ads directly through Shopify’s platform. Mr. Spiegel said he has also seen a lot of success by running ads for Snap’s advertising products on Snapchat.
Snap doesn’t report specific data on its advertisers but did say on its second-quarter conference call that recent initiatives have helped to broaden the types of advertisers on the platform. On Wednesday, Mr. Spiegel said Snap has been growing the number of advertisers as well as the amount spent.
This is evident in recent results. Snap grew overall sales in the second quarter by 48% year-over-year—its best growth since the first quarter of 2018. While its value proposition may not resonate with older executives at all big, established brands, Snap reportedly has done well with direct-to-consumer startups like oral-care brand Quip and mattress-sheet company Brooklinen.
But such initiatives will only go so far. Self-serve features and in-app ads won’t be effective with execs who aren’t socializing on the app or interested in advertising on the app in the first place. Mr. Spiegel himself said that advertisers looking to target a much older demographic on Snapchat aren’t likely to have much success.
Analysts are expecting annual sales to continue to grow upwards of 40% for the next three quarters. Much of that represents a rebound from last year’s unpopular Android redesign, though, and growth is expected to moderate by the middle of next year.
Snap shares have rallied by over 200% this year, nearing a one year highs in terms of enterprise value to forward sales. Investors are a bit too confident that the growth picture won’t fade.
A recent RBC advertising survey found 95% of advertising professionals say they are spending on social platforms, with 54% of those allocating more than 20% of their marketing budget to the category—a record high across the past 14 semiannual surveys performed by the firm. Unfortunately, not all canvases had the same appeal.
RBC’s survey showed that while future spending intentions on Snapchat improved in September versus April, Snapchat spending remained the weakest of all surveyed platforms. These included the likes of Facebook, Instagram, Twitter, YouTube and Pinterest. In fact, 76% of all ad professionals surveyed said they didn’t advertise on the Snapchat platform.
Snapchat has had fantastic success with younger users, with 75% of13 to 34-year-olds in the U.S. now active on the platform, according to the company. However, speaking to a group of investors on Wednesday at Goldman Sachs’ annual “Communacopia” conference in New York, Snap Inc. Chief Executive Evan Spiegel said strength in his company’s core demographic “can actually work against us” when it comes to advertisers.
Because the largest segment of Snap’s users are young, older brand executives don’t necessarily use Snapchat frequently, he said, if ever. This can mean that they don’t understand the platform and, therefore, may not see the value in advertising there.
Snap has been working to combat friction between its platform and advertisers to boost sales. The company said it launched a self-service-ads platform in 2017, which has helped.
Earlier this year, Snap rolled out Instant Create, which enables advertisers to make ads in three steps. In April, Snap announced a partnership with ecommerce tech company Shopify, allowing merchants to purchase Snapchat ads directly through Shopify’s platform. Mr. Spiegel said he has also seen a lot of success by running ads for Snap’s advertising products on Snapchat.
Snap doesn’t report specific data on its advertisers but did say on its second-quarter conference call that recent initiatives have helped to broaden the types of advertisers on the platform. On Wednesday, Mr. Spiegel said Snap has been growing the number of advertisers as well as the amount spent.
This is evident in recent results. Snap grew overall sales in the second quarter by 48% year-over-year—its best growth since the first quarter of 2018. While its value proposition may not resonate with older executives at all big, established brands, Snap reportedly has done well with direct-to-consumer startups like oral-care brand Quip and mattress-sheet company Brooklinen.
But such initiatives will only go so far. Self-serve features and in-app ads won’t be effective with execs who aren’t socializing on the app or interested in advertising on the app in the first place. Mr. Spiegel himself said that advertisers looking to target a much older demographic on Snapchat aren’t likely to have much success.
Analysts are expecting annual sales to continue to grow upwards of 40% for the next three quarters. Much of that represents a rebound from last year’s unpopular Android redesign, though, and growth is expected to moderate by the middle of next year.
Snap shares have rallied by over 200% this year, nearing a one year highs in terms of enterprise value to forward sales. Investors are a bit too confident that the growth picture won’t fade.