Three Big Advertising Questions Hanging Over a Snapchat IPO

Snapchat’s potential as a marketing tool is now being investigated.

Facebook and Twitter have discovered that garnering Wall Street’s attention puts an enormous amount of pressure on the business. Snapchat may be the next in line, and CEO Evan Spiegel will have to face the challenges that come with it.

Wall Street Journal Inc. reports that Snap Inc. is currently working on a public offering proposal for this coming March that would be worth at least $25 billion.

Snapchat has been utilizing digital marketing more and more as of late, putting it on par with other social media platforms like Twitter and Facebook. Spiegel puts forth a lot of effort in order to ensure his consumers do not begin to think of the service as “creepy.”

Investors, however, do not seem to care about being perceived as creepy; they are looking for Snap Inc. to utilize any opportunities it can.

For obvious reasons, adding more users is the best option. This means that Wall Street’s standards will be set fairly high for Snapchat, which already has 150 million users.

Twitter, for example, has seen its stock drop consistently at the end of each quarter due to investors seeing little potential for the growth of its user base. Twitter has also had issues with its advertisements; officials claim that poor performance by its direct-response ads were to blame for an inauspicious quarter in 2015.

Facebook has also experienced similar tribulations. Facebook publicly announced a decline in revenue, causing marketers to question if advertising on Facebook was even worth the time and money invested.

First, let’s look at the major questions that face Snap Inc.

How is Snapchat evolving the way they advertise?
Snapchat used to target its consumers based solely on their age or gender; until recently, that is, when marketers decided they wanted to delve into deeper demographics. Snapchat recently unveiled new options for targeting its audiences, such as using its users’ email data. The types of videos users watch, such as sports or fashion, can also be used to target them.

While this method of advertising is exceedingly common throughout the rest of the Internet, it is a very new and innovative option for Snapchat.

Recode recently reported that Snapchat launched its API (advertising application program interface), which allows third parties to sell Snapchat ads. Theoretically, this should increase their advertising’s efficacy by allowing their ads to sold more efficiently.

Can Snapchat profit from TV?
Today, web video is booming while cable TV audience numbers wither; as a result, social media companies like Facebook and YouTube are competing for ad space in television. Snapchat is also pursuing this endeavor. Earlier in 2016, Snapchat signed a deal for advertising sales with Viacom, one of the largest television companies. Furthermore, Snap Inc. hired Viacom’s Jeff Lucas, their ad sales chief.

Lucas, a seasoned veteran of the industry, has just the right connections that Snapchat is looking for. He is tasked with serving as the liaison between Snapchat and these companies.

How does Snapchat measure up?
After Facebook publicly apologized for overestimating a video metric for over two years, advertisers are very meticulous about measuring the performance of digital media. To sum things up, marketers want proof from an independent third-party that their ads are actually being seen (and subsequently their products are being sold), and the word of the social media platform hosting their ads just is not good enough.

Snapchat has been preemptive in preparing for this potential issue by hiring top-rated measurement executives from companies like Nielsen and Moat to ensure their campaigns can be accurately verified. However, it is uncertain as of now whether or not Snapchat can distinguish itself in the market from others following the same path. For more information regarding the big advertising questions, [Click Here].