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Snapchat doubles down on its advertising offer, but will brands bite?

Snapchat

Snapchat’s offer to advertisers has expanded in recent months as it opened up everything from Commercials to e-commerce and upped the ante for professional creators. Its ad revenue soared 66% this year according to its recent earnings report, up to $770m. So why do brands still question its value in media plans? We take a look as part of our deep dive into all things mobile.

Snapchat’s ads business has been built on Sponsored Lenses, instream Snap Ads and publishers creating content for its Discover platform. But in the past year it has doubled down on its offering, releasing new e-commerce and AR shopping tools, rolling out its dynamic ads format globally and making its Reserved Buys tool open to all.

Dynamic Ads has proven a hit. Targeting e-commerce and other direct-to-consumer brands, Snapchat has allowed advertisers to quickly and easily create ads in real-time, pulling from their own product catalogues. These ads are then targeted at users based on their interests.

Adidas Canada reported a 4.4-times incremental return on ad spend after using the tool, Snap claims.

Also proving a hit is First Commercial, a full takeover that guarantees a brand’s ad experience will be the first a user sees when they’re watching premium shows in Discover.

Since launching it in Q4 last year, Toccara Baker, head of product marketing at Snap, says big brands have been using it to mirror major TV campaigns. ”We saw a significant amount of investment throughout Christmas. Those tent-pole time periods are definitely where we see a lot of activity.”

But other tools are still in the “to be decided” column for marketers. Snap is working hard to make Lenses a core part of the shopping experience on the app. Earlier this year it announced a new tool that will allow users to browse a brand’s catalogue of clothing and accessories, and virtually try on goods through its augmented reality tech. Meanwhile, a feature called Screenshop allows users to scan a friend’s outfit and find similar items in the app.

You can read more about Snapchat’s plans for AR e-commerce here

“It has really allowed advertisers to understand how they can leverage AR as not just an upper funnel or awareness format, but for lower funnel or mid-to-lower funnel objectives,” adds Baker. ”You can have a consumer experience a product and essentially shop a product using their using their phone.”

Brand hesitancy

But for brands to dedicate real ad budgets to Snapchat, media buyers say it still has work to do on convincing them its 500m monthly userbase is willing and ready to buy.

Lily Scotcher, digital account manager at Yonder Media, says Snapchat is still primarily thought of as a place for the 13- to 24-year-old age demographic – not surprising given 70% of the platform’s users are under 25. It’s a long-running issue for Snap, but if it wants these new ad products to take off it has work to do on showcasing the potential to add unique reach to a group without huge spending power – and its potential for reaching other millennial age groups.

“I haven’t seen much deviation from the typical Snap Ad,” Scotcher tells us. “Often it comes down to budget levels and with smaller budgets we tend to see brands look towards Facebook and Instagram as a starting point for building scale across a wider demographic. It’s usually when budgets are larger or if a brand is looking to specifically reach a younger audience that Snapchat comes into the mix. Even though there are plenty of demographic stats from Snapchat showing that the age categories have widened, there’s still this sense amongst marketers that this is only a platform for Gen-Z.”

At We Are Social, a global agency that counts Disney, Adidas and Lego among its clients, global head of media Brittany Wickerson says it has seen adoption of new ad offerings from Snap vary widely from region to region. In the UK, for example, uptake from brands is still low.

“In many markets, Snapchat is still seen as a platform that caters to a predominantly younger audience and there are also concerns over the size and scale of the user base as a viable advertising platform,” she says.

“Snapchat penetration rates, audience profiles and use cases tend to vary widely by market. This regional variation results in very different client approaches. For example in Saudi Arabia, where Snapchat penetration is over 50%, adoption and use of the platform is very strong, specifically with females, making it a cost effective and viable platform for most advertisers.

“In contrast, in the UK, where penetration is 27%, Snapchat plays a more targeted role in media plans and is best used for specific industries and brands. This regional variation drives a great deal of difference in how diverse ad spend is on the platform. In some regions we’ve seen very strong success using dynamic ads for e-commerce and automotive, as well as the Commercial format for more premium video content during brand campaigns and launches. In general, the greater the adoption of the platform, the more investment and more diverse that investment tends to be”

TikTok threat

But it now has a bigger problem than trying to change perceptions in marketers’ minds – TikTok. The ByteDance-owned app first hit the scenes four years ago but, thanks to the pandemic, its use has been propelled and it claimed to have 1.9 billion active monthly users at the end of last year. Its phenomenal rise is eating into Snap budgets.

“Every agency in town is being asked by clients ’what about TikTok?’, but clients have never asked ’what about Snapchat?’ to anywhere near the same degree,“ says Scotcher. “It’s a bit hidden from the average CMO, while Tiktok is much more visible and more easily understood. This is despite the fact that Tiktok has a much less mature ad product.“

And this is a problem because today’s CMOs seem to view social media platforms in two camps: established and experimental. Facebook and Instagram are well established and have a firm and fixed place in brand marketing plans. Snap may have once been the go-to for experimental budgets, but TikTok is now its biggest competition.

“In short, Snapchat is seen as a platform for experimenting, rather than guaranteeing results,“ says Mel Arrow, head of strategy, at BMB. “It’s for garnering learnings rather than ROIs. And, for brands that are only able to dabble in one of these experimental platforms, TikTok is definitely rising to the top.

“Perhaps it’s its own visible marketing or perhaps it’s the platform’s more egalitarian nature. If you hit the zeitgeist on TikTok with a well-pitched hashtag challenge, you have a decent chance of going viral, even without a prior presence on the platform. Snapchat is a much harder social media nut to crack.“

For more in-depth coverage on the present and future of mobile marketing, dial in to The Drum’s Mobile hub.

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