For most who don’t yet use Snapchat frequently I know the economic case feels like a stretch of the imagination because you’re caught up in the original Snapchat and I’m trying to offer a perspective about where the puck may be going. It’s up to Team Snapchat to live up to its financial expectations but I believe it certainly has the potential. I’ve heard the new media doubters before as nobody thought Google, Facebook or Twitter would ever make money.
From the business perspective you need to understand a few things about media and video in particular. The following factors matter a great deal to media: reach, immediacy, authenticity/endemic, engagement, geography and brand ...view middle of the document...
Reach matters to advertisers for an obvious reason. The people who spend the most money on reaching consumers: consumer products, car companies, food & beverage, entertainment – need to reach mass audiences and smaller channels aren’t as effective for them relative to the time to produce creative and learn how to perform in a channel.
Immediacy is tremendously important in advertising. If you’re trying to promote a film that is going to be released then controlling the “flight schedule” of your advertisement matters a great deal. In a world of time-shifted media and consumers distracted by multiple media options – being able to rely on reaching a consumer when you want to matters. That’s why live TV events are great for advertisers. But think of any product one needs to sell: cars during the buying season, politicians during elections, companies looking to clear out inventory or launch a new line, companies advertising for Christmas – many forms of advertisements rely on “immediacy” of a campaign.
And this is where the frequency of logging in for Snapchat matters. The fact that > 50% of Snapchat users tune in daily and the fact that stories disappear if not consumed helps drive this behavior. So while some people go mad that I would publish a Snapstorm (a short lesson on startup entrepreneurship) in a platform where it disappears in 24 hours – I actually love it. It creates a reason to “go now!” and that’s smart of Snapchat if they can maintain it.
Plus, Snapchat allows me to download my stories, which of course I do. And I will publish them later (reruns?) in a different venue. Ultimately Snapchat needs to build out its creator tools to make life easier for content creators but I have no doubt this will happen.
I would also point out that Snapchat is becoming one of THE places to see breaking news on video in a way that isn’t reported widely enough. I have found no better platform in a national event like the Paris bombings to see what is happening on the ground by real people. And they also are great for sports events (I watch the Eagles pregame videos from fans aggregated in one place, for example).
3. Authenticity / Endemic
The other thing that matters tremendously to advertisers is knowing that they can reach an “endemic audience,” which basically means a targeted user. Facebook crushed this because they had so much data about whom we were as users and could target us specifically with relevant ads that could be measured by engagement and refined by algorithms if we didn’t engage. Not yet completely reported but Snapchat is snapping up some really great ad technology professionals from FB and from the LA ecosystem.
But Snapchat starts with one hell of an advantage. Their core audience is already segmented heavily towards the hardest to reach demographic (young people) and one of the most important economically because they drive trends and purchasing of music, clothing, video games, movies and so forth.