We are talking about a serious amount of money, money that was lastly handed out in such a volume to Mr. Mark Zuckerberg and his Facebook. Back then, Facebook amassed a half billion daily active user on their platform while Snapchat is currently at 158 million users.
I have to admit until very very late I never saw the potential of Snapchat, especially since it was very confusing to use and because many features can easily be copied by existing apps or new startups.
Personally, I have the app installed on my phone and used it here and there but after Instagram introduced stories, I was gone. What I did not realize though is that Snapchat is more than meets the eye and this came back to me the day they changed their name to SNAP INC
I never liked the name Snapchat as it limited the app to what it could be, it is a similar problem that Chatbots nowadays have, instead of being called Cognitive or Intelligent Agents.
The media section that was none existent in the early beginning of the app, has gotten the biggest real estate on the app now and this is where I absolutely see the future of the app as an equivalent of what MTV was for the Millennials.
Video has always been the preferred medium but TV has not moved with the form factor presented by the mobile revolution which is not landscape but horizontal.
Here’s how describes it describes it:
“Two of the most popular forms of digital video advertising at the time were pre-roll horizontal video advertisements and in-feed horizontal video advertisements. Pre-roll advertisements played before the content that a user wanted to watch, leaving users feeling like they had been blocked by an advertisement and frustrated that they had to wait to see what they had selected to watch. In-feed advertisements were less obstructive, but they weren’t full screen and users often scrolled right past them — just like a banner advertisement on a website.”
TV recreated for Generation Z
I think that while most people see Snapchat as a messaging and social platform, Snap Inc might have already eyed for a long time to reinvent TV for the new generation of consumer.
The demographic that loves Snapchat is also the demographic that is watching less TV, according to Snap — so if the company could recreate TV ads on mobile, it could score big.
“We wanted to figure out how to capture the entertainment and creativity of television advertisements,” Snap wrote.
A significant change to the Ad distribution is the vertical form factor which is the natural way you hold you mobile of even tablet. Second, the user is on control whether he want to watch an Ad or skip it.
The ads are also implemented in their stories, making them seem more a part of the story rather than a disrupter.
Selling with the flip of a finger
While the industry still looks for new ways to create ad banner or how to integrate more and more commercials into the video, Snapchat gives the power back to the user, enabling them to either swipe the commercial away or swipe up to purchase, 2 decisions, 2 beneficial outcomes for both the user and snapchat.
Another great thing is the possibility to hyper target the user through interest patterns that pretty nifty algorithms can filter out of the usage. This approach does not only make Snapchats ads better than most other online mediums but also better than most TV spots.
Where’s the money
But why TV one might ask, is there not much more money to be made in the purely online focused business? Well, this question might sound reasonable as long as you don’t know that there is a huge amount of money being used in the TV ad business, over $70 billion annually to be precise.
So the IPO seems to make a bit more sense now having this in mind and not just the capabilities of a storytelling social community app.
“Worldwide advertising spend is expected to grow from $652 billion in 2016 to $767 billion in 2020,” Snap wrote. “The fastest-growing segment is mobile advertising, which is expected to grow nearly 3x from $66 billion in 2016 to $196 billion in 2020. We believe that one of the major factors driving this growth is the shift of people’s attention from their televisions to their mobile phones.”
If ad budgets move away from TV and toward mobile phones, it makes sense those new dollars would gravitate toward something that feels more like old-school TV. Snap’s pitch is that its ads are like TV, only improved.
As with every major shift in media and technology, this change will not happen overnight and Advertisers won’t through their money yet on the Snapchat bandwagon. Snapchat is still in its reality infancy and created their first revenue last year which was around $400 million (2016)
Snapchat is also not the only tech company ramping up their efforts in this area, facebook started for a while now heavenly investing into their video efforts, trying to bring high-profile content creators and more story like the episode to their user community which reached almost an epic 2billion.
What remains to be seen is whether TV advertisers will buy it — either from Snap, Facebook, YouTube, or anyone trying to convince them that this is the generation of mobile products that finally make sense for the end user. As always, time will tell. The only thing these companies should not do which the print and also TV business have done is to ignore their users/viewers and their demands, we do not live in a world anymore where mistakes like this will be tolerated.