Social media and messaging platforms have seen stellar growth over recent years, with the number of smartphone users worldwide set to surpass 2bn by 2016. The number of app developers and publishers monetising their apps has also increased by 12% in 2015, reaching 85% overall – according to a report by Millenial Media. But for social media platforms, worldwide growth has not come without considerable challenges. The goal is to monetise their user base without intruding on users’ overall experience.
Native versus in-app advertising
Traditionally, social media platforms such as Facebook, Twitter and Instagram have incorporated bars and banners with sponsored in-feed native ads. Earlier this year, Snapchat looked to monetise its huge user-base by launching its Discover in-app advertising feature. The company opted for an alternative model to the traditional native advertising used by other players in the social advertising sphere; the app’s chief operating officer Emily White views such ads as an “attempt to trick” the audience.
The aim was instead to provide a non-intrusive extension to its ephemeral photo and video sharing service. Snapchat has created an integrated content distribution platform where advertisers such as CNN, MTV and Comedy Central have their own space on the app and with whom users may choose to interact. Publishers place ads in between their content so it is viewed naturally while swiping along. Adhering to the nature of the app, the video content in the Discover feature disappears after 24 hours, encouraging readers to actively return the following day to explore what’s new.
Snapchat’s advertising approach
With Snapchat’s users primarily aged 18 to 34 according to a recent Comscore study, advertisers are invited to communicate with the millennial demographic on a more personal level than they would via traditional televised content. Snapchat’s advertising approach is split into two streams: it sells advertising space directly at a premium, while also allowing publishers to sell space at their own rates. The company had announced earlier this year that a 24 hour advertising feature would cost advertisers a flat rate of $750,000 per day; its publishing partners could also charge exceptionally high prices. The split sales model also affects revenue share: if a publisher sells the ad space it can recoup 70%, while if Snapchat sells the ad directly the revenue is split 50/50 between Snapchat and the publisher.
Although Snapchat’s high risk, high reward proposal was initially criticised by some as unjustifiably expensive and unproven, Snapchat’s in-app advertising model has so far proved successful. Numerous brands have been keen to spend on the service. According to figures from 7Park Data, Snapchat users’ average weekly data consumption has grown since the launch of Discover from 150 MB to 400 MB per week in Europe and 150 MB to 600 MB per week for US users.
Discover ads are being priced at $100 for every 1000 views – almost double what premium video publishers expect to receive. Snapchat’s publishers are already recouping around $50,000 to $100,000 per day. Interestingly, some publishers (such as ESPN) are bundling Snapchat ad inventory with space on other platforms and, as part of these packages, are charging over $100,000 per day for access to Discover.
Addressing other concerns about the high cost of advertising on the app, some Snapchat publishers are providing advertisers with a safety net: they are guaranteeing view volume based on recent traffic data. This policy extends the life of some content until it meets the guaranteed minimum view volume. Some advertisers will therefore receive more than just 24 hours of exposure.
Snapchat Discover is encouraging advertisers to create better ads; it demonstrates just how effective a combination of traditional live-event advertising and the latest in-mobile adtech can be. Its innovative ad model combined with its unique millennial user-base allows advertisers to access an audience which has otherwise proved difficult to reach. Advertisers are recognising that mobile is fast becoming a key element of marketing strategy; Snapchat’s alternative model may just be the winning advertising format that mobile needs.
Louis Huglin is an associate in the commercial/media, communications and technology group at Olswang
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