Study: 47% of advertisers spend less on Snapchat video ads than expected

Brief:

Advertisers are turned off by image-messaging app Snapchat and show much greater preference for rival Instagram, the Facebook-owned app with 1 billion users worldwide, per a survey by financial services firm Cowen reported on by Business Insider. Media buyers said their clients prefer to advertise on Instagram Stories (90%) over Snapchat Stories (10%), referring to the app features that string together several images or videos into a single post.
Almost half (47%) of ad buyers said they spent less on Snapchat video ads than originally expected, while the app’s content quality ranked eighth out of nine possible choices, ahead of only ad exchanges, the survey found. Ad buyers ranked Instagram No. 1 in terms of spending intentions with a gain of 26%, and for digital video spending plans with a 30% increase, per Business Insider.
Cowen forecasts that Snapchat will report 192 million users for Q2 2018 for a small gain of 1 million new accounts from the prior three-month period. Cowen surveyed 70 ad buyers for its report as Snapchat’s parent company Snap prepares to publish its quarterly results on August 7.

Insight:

Cowen analyst John Blackledge has been particularly pessimistic about Snap’s ability to become profitable as Snapchat’s user growth slows and advertisers favor other social media platforms to reach younger audiences, particularly Instagram. While Snapchat pioneered popular features like the Stories format, Instagram has successfully copied features that expand the platform’s marketing capabilities.

Ad buyer sentiment toward Snapchat reflects audience disengagement from the platform, as Cowen discovered in a survey last month of 2,500 U.S. consumers. Snapchat users said they used the app about 33 minutes a day on average, or 7% less than a year earlier. The reduced user time may be a reflection of Snapchat’s redesigned app that was intended to appeal to new audiences but also turned off many loyal users. A survey of Generation Z found that a fifth of users are looking at Snapchat less frequently because of the redesign and growing ambivalence toward features like Snapstreak, which marks consecutive number of days friends have exchanged a message with each other, per Business Insider.

Snapchat had the lowest prices for ad placements among social media platforms, per marketing technology firm and Snapchat partner 4C. Snapchat ads cost an average of $2.95 per thousand impressions, compared with $4.20 on Instagram and $5.12 on Facebook's app during the first quarter of the year. The lower prices resulted from Snapchat’s shift to a fully automated programmatic ad platform. Snapchat sold 95% percent of its ads programmatically in the first quarter at prices that were 65% less than a year earlier.

Snap continues to develop ways to appeal to advertisers and social influencers, and to generate direct-to-consumer commerce. Snapchat this month debuted a native commerce feature to let influencers earn money from products sold through their posts. Snap also created more self-service features, like its Ad Manager tool introduced last year, that opened up its platform to a wider group of advertisers. It created a Snapchat Certified Partners program to connect marketers with third-party providers of ad tech tools and in December introduced Lens Studio to simplify the creation of AR content.