May 09, 2017

SNAP - Snapchat Steps Up Effort to Attract Direct-Response Advertisers

By Michael Foster
Snap's recently announced robust API may boost eCPMs, ROI and ARPU for Snapchat, making it more competitive for direct-response dollars.

The scheduled June release of Snap Inc.'s full software platform for managing advertisements is expected to bring more data-driven marketing opportunities for Snapchat.

While some preferred marketing developers have worked with Snap to develop the platform for quite some time, this broader release, which was announced late last week, indicates the company is finally confident that its API is easy enough to use and predictive enough to boost ROI on direct-response campaigns. In the past, OTR Global's sources have said the company is almost entirely restricted to brand advertising dollars, which has bolstered its revenue growth in the short term, but its long-term viability lies in delivering and demonstrating a dollar-for-dollar spent ROI to marketers who have more concrete goals.

Various Targeting Options
The initial form of the self-serve platform appears to cater to these needs. As with most other platforms, including Facebook Inc., Twitter Inc., and Alphabet Inc.’s Google DoubleClick platforms, API offers device-based targeting and geographical targeting based on the user’s physical location (on mobile devices, this goes beyond IP-address targeting). Snapchat also offers demographic targeting by age, gender and proprietary demographic profiles from Oracle Corp.’s Datalogix.

Unique to Snapchat is its audience-based targeting, which is the platform’s response to the interest graph used by Google Search, Facebook and Twitter to target ads on those platforms. Snapchat initially plans to offer audience segmentation according to lifestyle, shopping profiles, media preferences and custom audiences — a tool similar to Facebook’s “custom audiences” and Google's “customer match” tools, which allow marketers to retarget existing customers.

Pricing Model and Performance Metrics
Ads served on the platform are to be paid on a per-swipe basis, and marketers are expected to be able to set price budgets for paying per swipe. More sophisticated payment models, such as pay per download or pay per completed sale, are not available on the platform.

Marketers could see their eCPM based on cost per swipes (CPS) and total impressions served. The CPS model has already been used by some brand advertisers in the past, and OTR Global sources reported resulting eCPMs in the high teens on these campaigns.

The campaign also offers marketers the ability to optimize advertisement campaigns by analyzing past performance and creating new campaigns that improve upon past campaigns. Theoretically, such an iterative improvement to campaigns could cause both pricing and ROI to increase, thus boosting eCPMs, ARPU for Snapchat, and ROI for Snapchat. Facebook has become the gold standard of creating iterative improvements to social display advertisements in the past by using data sets to improve advertisement performance. Now Snapchat needs to demonstrate to marketers that it can replicate that success.

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