Snapchat is making news this week, not only planning an IPO but also pulling a Facebook by de-emphasizing the media content in its Discover sponsored section. Doesn’t that sound familiar? I wrote about Snapchat in April, noting it had become the flavor of the month, at least as far as my extended family is concerned.
This past week, Snap, Inc. was reported to be planning a $25 billion IPO, not surprising us — or anyone in the ad business. Any company that reaches, on a given day, 41% of 18-34 year olds in the U.S. is going to get noticed, as it positions itself as replacing the camera for today’s youth.
Presumably some of the $25 billion will go to making Snapchat a more powerful ad magnet. Every three or four days, Google’s AdWords brings in about as much as Snapchat is projected to make in ad revenue this year, about $366 million. That’s plenty of room for growth, with some analysts predicting ad revenue will triple next year. Like Facebook, Snapchat has more in mind than just allowing media companies to display their video wares online.
First of all, one has to really get what Snapchat is. Its whole approach, both in ads and content, is toward youth, just like MTV a generation ago. The ads are positioned as part of the fun. Two ad features, Stories and Discover, are currently bringing in most of the ad revenue. Discover isn’t going away, not at all, but the links to Discover ads have been moved to a less prominent position.
Snapchat has always been a little skittish about advertising, seemingly apologizing every time a new ad feature was introduced. That’s because it’s all about fun: “Our products empower people to express themselves, live in the moment, learn about the world, and have fun together,” the company proclaims, right on its yellow background home page. Google never promised fun. Snapchat does.
Presumably, then, Gatorade was having fun when its Gatorade’s Lens, based on the Gatorade dunk, garnered over 165 million views on Snapchat. According to Snapchat, “Sponsored Lenses offer a completely new take on brand activation, offering not just an impression, but ‘play time’ — the time Snapchatters spend playing with the interactive ad you’ve created. To activate Lenses, Snapchatters simply press and hold on their faces. Some Lenses include prompts like ‘raise your eyebrows’ to trigger an animation, adding a fun twist to the experience. And when you’re finished playing, it’s easy to send Lenses to a friend or post one to your Story. On average, Snapchatters play with a Sponsored Lens for 20 seconds.”
This is a long way from a traditional ad, but it’s geared to a young audience, and it must work, or it wouldn’t have gotten 165 million views.
Video Is The Future
Features like the Sponsored Lens are probably the future of Snapchat, not canned media content. I think Snapchat will eventually evolve into a video channel not unlike Netflix, and will eventually start producing its own content, the way Netflix evolved from distributing videos to producing them. If one looks at Snapchat as the youth Netflix, its future will become a bit more focused.
Snapchat turned down a $3 billion offer from Facebook in 2014 even though the company hadn’t reported a profit yet. If the IPO comes off, Snapchat would be valued at eight times what Facebook offered. Back in May, it raised $1.8 billion in a new round of funding, with Pitchbook reporting a new evaluation of the company at $17.8 billion. And most of that is because Snapchatters are mostly in the youth age demo, and because 70% of its audience is women. With as many as 150 million young people presumably having fun with it every day, can advertisers ask for a better audience?
I also find it intriguing that Snapchat has hired New York Post President David Brinker for a major role shepherding content business development at the social network. TechCrunch notes that, while at News Corp., “Brinker [led] a number of new business initiatives for the company, including the acquisition of social news agency Storyful in December 2013; News Corp’s global advertising exchange; and the digital transformation of the New York Post.”
Besides roles at grandparents.com and in corporate new media at News Corp., Brinker has been a consultant to MTV and Amp’d Mobile, among others. Back in August, NBCUniversal signed a big original content deal with Snapchat. The first fruit of this was a “The Voice on Snapchat” series that solicits user-submitted vocal performances, with judges, according to a Wall Street Journal story. It added that Jimmy Fallon’s “Tonight Show” and “Saturday Night Live” are also expected to be featured on Snapchat. All of this makes the claim that Snapchat is the MTV of 2016 look more and more accurate.