Brief:
- Image-sharing app Snapchat currently has the lowest prices for ad placements among social media platforms, per a report from AdAge, citing data from marketing technology firm and Snapchat partner 4C. Snapchat ads cost an average of $2.95 per thousand impressions, compared with $4.20 at Instagram and $5.12 on Facebook's app during the first quarter of the year.
- The lower prices can be attributed to Snapchat’s shift to a fully automated programmatic ad platform. In the first quarter, Snapchat sold 95% percent of its ads programmatically, with prices that were 65% less than a year earlier.
- Every kind of ad product Snapchat offers will be available programmatically through auctions with ad targeting and measurement by the end of June, per AdAge.
Insight:
The significant drop in ad prices on Snapchat is partially due to strategic reasons — being driven by the move to more automation for marketers — but is also a warning sign that the platform is struggling to attract advertisers.
Snap had warned in its last conference call with investors that its shift to programmatic ad sales would lead revenue gains to "decelerate substantially" in the current quarter from Q1 2018. The company this year has restructured its sales efforts, which meant cutting jobs as the company shifted focus away from creating labor-intensive, personalized campaigns for brands.
Snap also created more self-service features, like its Ad Manager tool introduced last year, to open up its platform to a wider group of advertisers, not just major brands. It also created a Snapchat Certified Partners program to connect marketers with third-party providers of ad tech tools that understand the platform, and how to create and measure ad campaigns on Snapchat. To appeal to a wider group of creatives, Snap in December introduced Lens Studio to simplify the creation of AR content.
Snapchat’s lower prices could also be a reflection of having fewer advertisers who are bidding for space on its platform than rivals like Facebook. The social giant has 6 million advertisers jockeying for ad space, driving up prices. Snapchat doesn't disclose how many advertisers it has, but it's not likely to be as many as Facebook, which also has a user base of 2.2 billion people, compared with Snapchat’s 191 million.
Only two years ago, Snapchat was charging brands $300,000 to $500,000 to sponsor a Lens, an animated filter that transforms people's faces in funny ways. Video ads were $750,000 each. Those prices were deemed too high by many marketers and Snapchat responded by offering ad discounts last year to smaller companies as a way to get more brands to try out its platform, which appeals to a younger demographic group than other social media apps like Facebook, Twitter and Pinterest.
