Guidance On How Snapchat Can Make Millions

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Snapchat are the topic of unprecedented speculation this week as they turn down offers from the worlds largest internet companies trying to make a land-grab from the much hyped social application. So without selling out, how can Snapchat make millions and even billions of dollars on its own? Here’s how…

The appeal of Snapchat is the temporary nature of its picture and video sharing functionality. Once the user has seen the sent image or video, the content vanishes and cannot be saved. To support the application and to keep it popular, Snapchat, Inc. will need to keep the application wholly free. To do so requires the support of Advertising.

 

To view a message on Snapchat, the user needs to hold their finger on the screen to view the message. If the finger is removed, the image cannot be recovered, so the user needs to keep their finger on the screen for a set duration of under ten seconds. This functionality cannot be circumvented so it means that the user has to be present in order to view the message. This is the key to Snapchat unlocking millions of dollars in Advertising revenue.

 

Advertisers have been struggling for decades to verify that users or viewers are actually seeing their ads. Recent advances in viewability technology demonstrate that Advertisers are willing to pay more for ad quality, which means proving that the ad was in view on the screen.

 

Touching the screen goes furlongs further to proving that the user is actually in front of the ad. Viewability alone cannot measure this.

 

If Snapchat puts Instream Video Advertising and static display images into their application and deliver them to users, full-screen between the user pressing on a newly delivered message and the content itself, then the user is forced to watch through a video ad or static image to see the content; perhaps a video of their friend filming themselves falling down the stairs.

 

Although there is no call-to-action related to the ad for the user (such as a click), the ad will still be seen, so Snapchat can sell the ad space based on views or video completion rates. The inventory becomes much more valuable that video or images in other apps or websites because it comes equipped with its own verification technology – the requirement for the user to touch the screen.

 

Snapchat simply need carve out the available  inventory based on the average number of video Snaps generated each day. They then need to use a mobile based publisher ad server to manage the availability and price up the inventory. Big Brand advertisers will come flocking for the chance to improve their reach and frequency, especially when the inventory comes with a verification guarantee.

 

It would be a mistake for Snapchat to head down a premium model for their application. Their users are predominantly teenagers who will not have access to the capital. It took big players like Facebook and Twitter a long time to realize they needed an ad supported primary revenue stream, Snapchat, Inc. have the chance to join them today by establishing a technology stack to support advertising in their relative infancy.

 

This is why the future looks very bright for Snapchat, but they need to get their act together quickly, before doubting speculation among investors shrinks their audience and an incredible opportunity for Advertisers would be lost.

 

About the Author: Gregory Cristal is Director of Global Accounts for DG – Mediamind: the worlds largest publisher-independent third party ad serving technology. He has worked in digital advertising for the duration of his career spanning almost 8 years and is one of the youngest leading consultants in global digital advertising. He authors this blog as a forum for his private opinion which is not in any way affiliated with DG. His book “Ad Serving Technology: Understand the marketing revelation that commercialized the Internet” will be available from January 2014. To reserve your copy please register through this link.

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