When Snapchat’s chief executive, Evan Spiegel, took the stage in June 2015 at a marketing conference in Cannes, France, to champion advertising on the ephemeral messaging service, advertisers were wary.
Yet by this June, when the conference was held again in Cannes, Snapchat had become one of the most buzzed-about marketing platforms. It is convincing companies that its ads — which let users adorn pictures and videos with all manner of images and branding — create a more interactive experience than Facebook and YouTube ads, which most users watch passively.
“Advertisers want to be associated with the trendiest, newest thing, and this year, that’s Snapchat,” said Chad Stoller, managing partner at IPG Media Lab, a marketing consultancy. How Snapchat got its ad business on track is a case study of a fast-growing start-up overcoming growing pains and persuading companies to try untested ways to reach consumers.
When Snapchat opened itself up to advertisers more than a year ago, many initially griped that the company needed to lower its ad prices. Some were mystified about how to reach the right audience with the ads since Snapchat did not provide traditional ad-targeting tools.
Most of all, brands wondered how Snapchat could be effective when the ads — like Snapchat messages — disappeared. In the last 15 months, Snapchat has moved to respond. It introduced new ad formats.
It dangled its attractive user base — the service now claims 150 million daily users, including nearly half the US’s population aged 18-34 — to lure advertisers. Most important, Snapchat has persuaded brands like Tiffany & Co., Kraft Foods and Burger King that its ads let them interact playfully with this young audience.
When Snapchat entered the ad business, “it didn’t quite have the infrastructure, and the market didn’t understand it,” said Sarah Hofstetter, chief executive of the ad agency 360i. “It was a bumpy beginning.”
Now Snapchat faces the challenge of keeping up its nascent ad business as its early success raises the competitive hackles of rivals. Instagram, the photo-sharing app owned by Facebook, introduced a near carbon copy of a Snapchat photo and video service known as Stories.
A lot is riding on Snapchat’s building up its ad business. The company, which Spiegel helped found in 2011 and is now based in the Venice Beach neighbourhood of Los Angeles, needs to justify a valuation of about $19 billion (Dh69 billion) that its investors have placed on it.
The company also faces sky-high revenue expectations; the investment bank Jefferies recently projected that Snapchat’s revenue would grow to $1 billion next year from more than $350 million this year. In an interview, Imran Khan, Snapchat’s chief strategy officer, said the company’s ad formats gave brands “a creative platform” that made ads a “natural experience”.
While Snapchat’s best-known figure, aside from its ghostly logo, is the youthful Spiegel — who in the last year has been photographed for the Italian magazine L’Uomo Vogue as well as frolicking with his supermodel fiancee at beaches — it is Khan, a former investment banker, who has been overseeing the company’s advertising efforts.
Khan joined Snapchat in late 2014. At the time, Snapchat had just run its first ad, a short trailer for the teenage horror movie Ouija. Advertisers say those early video ad campaigns cost as much as the most expensive ads on YouTube, which run in the hundreds of thousands of dollars.
“At that price, it was too hard to test the waters and learn in a new environment,” said Hofstetter of 360i. Khan set about trying to respond to concerns while building out an ad team. He recently recruited Viacom’s advertising sales chief, Jeff Lucas, to be his new vice-president for ad sales.
He opened new ad sales offices in cities such as London and Sydney to provide more support to those making ads for Snapchat. Snapchat also began introducing less expensive ad products, some of which start at just $5.
This summer, the company let third-parties sell ad space on Snapchat, which makes it easier to get more ads onto the app. Khan’s biggest job was to explain why Snapchat’s unusual platform was better for advertisers.
The task was thorny because Snapchat is a messaging, sharing and broadcast service where most content disappears. Companies had few comparable apps to judge Snapchat against.
The potential became clearer after brands started experimenting with Snapchat’s geofilters, a tool that adds custom stickers, a type of colourful icon, to the app when people enter a certain geographic area, and lenses, which are whimsical images that transform someone’s face in the app. At this year’s Super Bowl, for instance, Gatorade bought a Snapchat lens that let people pour a virtual cooler of the sports drink on themselves in the app.
That lens was viewed about 165 million times in a single day. In contrast, the most-watched ad on YouTube last year, Clash of Clans: Revenge, was seen 82 million times, according to AdWeek.
Brands that “had become too focused on metrics” suddenly saw in Snapchat a “playful way to deepen customer loyalty and affinity,” said Constance DeCherney, director of strategy at the ad agency TDA Boulder.
In May, for Cinco de Mayo, the fast-food chain Taco Bell designed a Snapchat lens that allowed people to turn their heads into a taco in the app, with the chain’s logo sitting prominently on the screen. Such holiday-related lens ads reportedly cost as much as $750,000.
The ad received about 224 million views in one day — and is the most-viewed ad ever on Snapchat. “It was all taco, taco, taco,” said Ryan Rimsnider, senior manager of Taco Bell’s social media team. “It was a little surreal.”
Taco Bell, a major advertiser, was an early supporter of using Snapchat as a branding tool. Snapchat executives recently attended Taco Bell’s three-year “Snapiversary”, which included a custom geofilter for the event.
Taco Bell later sent a taco truck to Snapchat’s headquarters. Since those early ad experiments, other brands have started campaigns on the messaging service.
Tiffany & Co. began its first Snapchat campaign with a lens of the Tiffany logo and flying hearts in Tiffany blue that people could use to decorate their selfies and videos.
Snapchat said millions of consumers in the US, Australia and Italy played with the lens for about the same amount of time as it takes to watch a normal video ad. They then shared their pictures and videos, spreading Tiffany’s brand. The lens is now gone, replaced by a geofilter that adds Tiffany-branded stickers to photos when you enter a Tiffany store.
“Consumers want something more than a passive experience,” said Diana Hong-Elsey, Tiffany’s vice-president for global digital marketing. “When you know content will disappear, you want to interact with it in that moment.”
