How Snapchat can avoid Apple iAd mistakes with $750,000 fee for disappearing ads
Snapchat’s decision to demand $750,000 a day for its new disappearing ads will highlight how much cash brands are willing to risk to find out the value of the channel as it looks to avoid the troubles Apple had when it tried to get buy-in for its similarly priced iAds.
The fee has split the advertising community, according to Ad Week, with some reluctant to pump so much into a young app, while others only confident enough to run smaller campaigns.
Snapchat launched its first ads late last year and is positioning them as the antithesis of what it has claimed are the creepy or targeted” efforts employed by its larger and more mature rivals.
Advertisers including McDonald’s, Samsung, Macy’s and Electronics have been early adopters, keen to see whether the opt-in, branded, self-destructing videos and photos that show up users’ feeds can make ads part of the Snapchat experience. The social network’s prized audience of 18 to 24-year olds have responded warmly to the company’s softly-softly opt-in approach, according to a Snapchat commissioned Millward Brown study.
Nearly two thirds (60 per cent) of 600 the app’s US users said they liked the “Our Stories”, which curate user-generated content of major events on a sponsored feed, while 44 per cent said they liked the “Brand Stories” branded posts. These levels of receptivity are more than three times the norm, the report claimed, only 17 per cent of US consumers find ads on their smarpthones very or somewhat favourable.
It is a situation that echoes Apple’s efforts to get buy-in for its iAds 2010. Advertisers balked at the $1m minimum campaign fee the company wanted for a service that had limited reach and blunt targeting capabilities. Apple has since revamped the offering and become more open to sharing user data with marketers, a strategy industry observers believe Snapchat will eventually have to adopt once initial interest in its ads wanes.
Ads on the messaging app are basic in comparison to other social networks with brands unable to access data to target their campaigns. However, Snapchat’s terms and conditions allude to such a future and state that it may “provide advertisements, content or features that match users’ profiles or interests” with users consent.
Chris Pearce, joint chief executive of TMW, which launched a Snapchat campaign for Lynx in 2013, said the fee for Snapchat’s fledgling ads was unlikely to worry those big spending brands more interested initially in driving engagement and innovation on the platform rather than reach and return-on-investment.
“Ultimately, however, the market will determine whether it’s a successful move or not. If brands see a demonstrable effect over other media they will be comfortable with the price tag. If they don’t, we all know where it will end up,” he added.
Snapchat, which has not made any revenue up until now, is set to broaden its advertising offering in the coming months and the price-tag anchors its value for all future negotiations. Mobile advertising totalled $18.99bn in the US in 2014, a 78 per cent jump from $10.67bn in 2010, according to eMarketer.
Chris Hassell, founder of creative agency Ralph, which has created social media campaigns for companies including AB InBev and Netflix, said: “Apple didn’t come out of the £1m iAd thing well yet Snapchat don’t even have the high-quality brand that Apple are generally known for. If they maybe publicised that they’re only interested in high quality ads and have a rigorous approval or consultancy service to work alongside brands and advertisers it might come across as a bit less desperate for cash. Not being able to target more effectively is horrendous.
“I’d imagine the conversation went “If we price it really high people will think it’s got to be better than it actually is. Also, we have brands by the balls as we’re currently known as the way kids chat. Finally, at least one brand will do it just to get the PR."
Snapchat’s cautious approach to monetising its userbase is emblematic of wider fears among younger social networks such as Instagram that opening up their platforms too soon and too much to brands could push users to rival services.
Alec Boere, managing partner at Rufus Leonard, which has developed digital campaigns for BT and Lloyds, said: "The problem for Snapchat is how much cash are advertisers willing to risk to find that out? Virtually every other publisher will have detailed analytics as to audience, reach and engagement of previous campaigns as a sales tool. This lessens the risk for advertisers. Snapchat won't have any of that yet, just general engagement metrics. Will those translate to engagement with advertisers? The honest answer is no, because that hasn't happened anywhere else.
“The audience Snapchat serves is not unique to Snapchat. The other big platform with that demographic is Instagram, who have also recently introduced adverts into users photo streams. I would say Instagram is a better comparison for ad models / success than iAd because of the demographics of the audience.”
Reaction to the $750,000 fee for its ads from advertisers will provide the litmus test for how Snapchat values its advertising offering moving forward. As it looks to carve out a niche for itself in the competitive social media space, the business will look to leverage its popularity among younger users as a premium alternative to rivals.