by Tina Folková
When in 2013 Snapchat turned down a $3 billion buyout offer from Facebook,
it looked not like insane and arrogant decision. Everybody from the company
thought, they are worthly more than that.[1]
Henry Blodget (Business Insider editor-in-chief) wrote a dreamily optimistic
post about Snapchat’s
fortunes. His main point wat that Snapchat would make money from advertising,
because teens are willing to pay for literally anything.[2]
Unfortunately, financial documents
showed that Snapchat was very far from profitable in 2014. The company lost a whopping
$128 million while
bringing in just $3 million
in revenue during the period Junuary – November of 2014. Even these numbers
weren’t convictive
enough to make owners of Snapchat regret their earlier decision not to sell
Snapchat. Mike Dempsey (from analytics firm CB Insights) said that „if Snapchat
is at a similar point right now in its business lifecycle as 2012-2013
Twitter, the new funding probably gives them a multi-year runway.“ [3]
Red numbers would only reflect about a month and a half
of ad revenue, since Snapchat started ad program in the middle of October 2015.[4]
The Profitability of Snapchat Discover
Snapchat Discover was launched on January 27, 2015. It promoted
company as more than just a messaging ap. It lets users view offering from
companies like CNN, Comedy Central, ESPN, and Yahoo! News, among other additional
entertainment providers. But according the Bloomberg (business and markets news, data and analysis) write-up, Discover hasn't proven to be cost-effective as
Snapchat expected. It says: „Snapchat’s media pertners say traffic to the new Discover page in the
Snapchat app started strong when it was introduced in Juanuary and fell off
dramatically after the initial surge of interest.“ [5]
However, according to ReCode, Snapchat is charging these companies around $100 per thousand views.[6]
If you imagine that each Publisher could
receive millions of views a day, you can realize how that adds up to
significant revenue for the app. In addition, if the Publisher decides to use
its space for its own ads, the Publisher must split the profits with Snapchat.
Companies in Stories
If a company decides that it wants to be seen in user’s Stories, it is possible.
According Adweek[7] reports
Snapchat charge some top brands $750,000
a day for placement. Accepting the price, a Universal executive was
quoted in the report as saying Snapchat was a key part of the marketing
strategy for their movies. Snapchat replies that they only offer the
opportunity to reach teenagers. While the ads are fleeting, user do have to
press their screens to view them, which shows clear engagement. [8]
Attractive for advertisers?
As Snapchat makes its platform better and better, it also
increases its attractiveness to advertiers. What contributes to even more
revenue growth is that Snapchat’s
user demographics are highly sought by advertisers. 50% of users are between
13-17 years old and the average usage is 14 times a day (Digiday survey[9]).
In August 2014, Snapchat was ranked the third most popular social app among
millennials, trailing only Facebook and Instagram. That makes Snapchat the fifth-highest valued
startup after Uber, Xiamoi, Airbnb and Palantir.
Sponsored Lenses
Snapchat’s
newest revenue source is called Sponsored Lenses, launched in October 2015. It
allows users to take a Picture or video of themselves and add different
animated filters to the shot. Various brand logos or branded animations can be
featured by these animations. The very first sponsor of lenses was 20th Century
Fox. They allowed animated selfie features with characters from „The Peanuts
Movie“.[10]
Users of Snapchat can add animated characters such Snoopy or Woodstock
to their messages. Snapchat will charge up to $750,000 for a brand to reach
entire user base on peak days (like Thaksgiving, Halloween, Black Friday, New
Years Eve, etc). During off peak days, the charge is $450,000 - $750,000.[11]
Future
We can only guess what other features will Snapchat annouce
in the near future. There are some predictions that Snapchat can reach No.1 in
social networks, mainly for the reason that Snapchat is more about messaging
than about marketing. Another reason is that Snapchat is using a Two-Way
Conversation (organisators of the festival are sending pre-photos of the stage,
while people are sending getting-ready photos for the festival). The main
advantage of Snapchat is its authenticity. It’s playful and cutesy, and its impermanence encourages people to
be their tru selves. Well, we all will definitely see...
[1] http://mashable.com/2014/01/06/snapchat-facebook-acquisition-2/#3MNgie7GXmqm
[2] http://www.businessinsider.com/how-snapchat-will-make-money-2013-11
[3] http://www.adweek.com/socialtimes/what-snapchat-loss-reports-dont-tell-you/626452
[4] http://techcrunch.com/2014/10/18/snapchat-ads-are-probably-cooler-than-facebooks-but-still-not-cool/
[5] http://www.bloomberg.com/news/features/2015-05-26/evan-spiegel-reveals-plan-to-turn-snapchat-into-a-real-business
[6] http://recode.net/2015/03/12/snapchats-ad-rates-for-its-discover-feature-are-really-high/
[7] http://www.adweek.com/news/technology/snapchat-asks-brands-750000-advertise-and-wont-budge-162359
[8] http://www.adweek.com/news/technology/snapchat-asks-brands-750000-advertise-and-wont-budge-162359
[9] http://digiday.com/platforms/snapchat-pitching-brands-agencies/
[10] http://moneymorning.com/2015/11/12/how-does-snapchat-make-money-2/?gateType=hostage&crType=pop_OEI_STI_WSII_TW_PPT_SMI
[11] http://marketingland.com/snapchat-will-charge-brands-to-make-their-mark-on-your-silly-selfies-145092
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