How Snapchat's shakedown of its London business could affect its relationship with agencies and advertisers

In a marked departure from a well-worn path employed by rivals like Facebook and Twitter, which have set up shop in other EU countries to take advantage of lower taxes, Snap Inc announced that all UK ad revenue and sales from countries which had no local salesforce would be billed through a newly-created British entity.

After news of Snap’s London plans travelled around the world on Tuesday, the company issued a clarification on the semantics of announcement. It re-iterated that London had not been, as was initially reported, selected as its new 'international HQ' and that it had simply chosen to align its corporate structure and business in the UK.

However, the tech giant’s common-sense decision to build upon its already 75-strong staffed London offering hints at the company’s want to be closer to clients and do business in a more straightforward fashion. "We believe in the UK creative industries,” said the firm’s general UK manager Claire Valoti, "the UK is where our advertising clients are, where more than 10 million daily Snapchatters are, and where we’ve already begun to hire talent.”

Just how, and if, the shakedown will affect how Snap works with brands and agencies remains to be seen. Staying true to its mysterious reputation the company hasn't divulged any further details, but that hasn’t stopped marketers reading between the lines.

A 'no-brainer'

Snapchat upped its charm offensive on brands in 2016, attracting spend from the likes of John Lewis, Domino’s and Unilever and in turn making it easier for advertisers to build a business case for using the platform. However, some marketers say they are still unfamiliar with what role the messaging app can play in their firm’s media plan, a concern that Snapchat could be looking to alienate by fostering more relationships with clients on the ground.

“Snapchat intimidates a lot of advertisers,” says Michael Ogundare, Rapp’s senior social strategist, adding that because it’s still a relatively new tool it can be seen as “gimmicky” for those who don’t immediately realise its potential.

Snapchat has 50 million daily active users in Europe and 150 million worldwide. Some 77% of those who use it in the UK are aged 18 and over, but Ogundare believes that in order to progress it needs to dispel misconceptions about its business, including the idea that it’s an app “for vain, sex-ting mad teens".

Being in close proximity to the UK’s best and brightest creative agencies will give Snapchat the chance to prove the worth of advertising within its walls, and Ogundare says the fact the business will be able to handhold agencies through its entire advertising process is a “no-brainer".

Ogilvy & Mather UK’s planning partner of innovation, James Whatley, observes that the practicalities of Snap planting firm business roots in London will indeed make things easier for agencies. He believes the real benefit, however, for Snap itself will be less about being able to offer quicker access to measurement reports and tech support, and more about the opportunity for the firm to build “proper relationships” with account managers and leads.

Meanwhile, James Connelly, chief executive and co-founder of mobile agency Fetch says his company has seen “promising early results,” from Snapchat, but agrees that for more money to flow into the UK business it will have to provide a high-standard of service to the UK advertising community.

“This approach has led to huge gains in platform understanding and ad-unit sales by its peers and I would imagine that is what Snap will intend to do next,” says Ogilvy’s Whatley.

Such a strategy could help Snap avoid being late to the party when it comes to maintaining a line of close contact with clients. Facebook’s director of agency partnerships, Ed Couchman, recently admitted that creative shops are still struggling to fully grasp how the Facebook can fit into their overall marketing and communications plan. The social network has even implemented an ‘Blueprint’ training program to educate marketers and find out what it can do for them, but Snap’s choice to grow its London offering may serve as a landing pad to help them avoid a similar situation.

Whatley is also of the opinion that Snap’s choice to shun Shoreditch and plump for the creative centre of Soho instead is “telling” given the LA-based firm's ambitions to be seen as a camera company and the area’s links to film and TV companies.

Post-Brexit positivity

Also telling, is the fact that Snapchat has singled out the UK as the place to do business.

As part of yesterday’s announcement a Snap spokesperson underlined the Britain's “strong” creative industries, a sentiment echoed by Valoti. The reveal raised some eyebrows given the number of companies who threatened to withdraw their headquarters from the UK in light of the EU referendum aftermath. However, Fetch boss Connelly points out that Snap’s decision backs up the belief that the UK, and in particular London, will still be an international capital for big corporations.

“After Istanbul and Moscow, London is the largest city in Europe and with the lowering of corporation tax in a post-Brexit world, is still very much an attractive global or regional HQ for technology businesses. It’s positive for the UK in so much as it will further increase our technology capabilities on a global platform, create jobs and nurture talent."

Obviously, it is still unclear what economic impact Brexit will have on British business in the long-term but Robin Grant, co-founder of We Are Social says in the wake of the UK’s impending EU exit that it’s positive to see London’s talent bank and “world-class” agencies are still attracting investment.

"Snapchat does have some work to do in terms of overcoming advertiser perceptions in the UK though,” he cautions noting recent allegations from an ex-employee that Snap misrepresented its growth, claims the company says have "no merit."

“It also needs to do more to show it is able to reach non-millennial users - for brands to increase their spend on the platform they need to see how it will help them reach more of their target demographic,” he adds.

A taxing decision

In it's most recent statement on its London plans the company underlined its commitment to paying taxes in the UK which it said it believed was “part of being a good partner” as it grows its local business.

“We want to pay taxes in the countries where we sell advertising, and this is an important step in building the infrastructure to achieve that goal,” it added.

When it comes to tax Snap has definitely taken the path of least resistance. Tech giants like Twitter, Uber and Facebook have all been criticised in the past for taking financial shelter in countries such as Ireland and the Netherlands. So, Snapchat’s choice to buck the trend could well pay off when it comes to reputation.

"Against the backdrop of an uncertain economic climate, a company such as Snap specifically making a statement about its intentions to pay corporation is possibly a world first the industry and a huge challenge to others like," says Whatley.

While it remains to be seen just how the move will play out for the company in terms of its relationship with advertisers, one thing that's for certain is that Snap won't stop moving in 2017. With one of the largest initial public offerings (IPO) in years on the horizon, the company is likely to continue its fervant courting of marketers and try to forge closer relationships with them.