Snap, like Facebook FB in its earlier years, is frequently being viewed, in terms of success or failure, from the point of view of monetization. It is relatively easier to acquire a large audience to use a free service like Snapchat, than it is to monetize those consumers and achieve large-scale advertising revenue growth.
In a further step toward enhanced monetization, Snap announced last year a new automated advertising product, Dynamic Product Ads (DPAs) in the U.S. and selected other countries. Snap has just recently extended that product to more countries in Europe, the Middle East, and Australia.
DPAs are appealing to e-commerce advertisers because it allows retailers and brands to more easily sell their services and products to consumers using Snapchat. Google GOOGL and Facebook already offer similar ad products, where an e-commerce catalog is uploaded into a template on a digital platform and then updated in real-time. The benefit to consumers is that they will get up-to-date listings of products and prices. The benefit to advertisers is that they will save time over previous methods of updating e-commerce digital listings.
Rob Seidu, the senior director of media activation in Europe for Adidas said they have seen an increased return on advertising spend during their test of Snap’s DPAs. “The launch of DPAs allows us a route to reach our target Gen Z and Millennial audiences with relevant product creative throughout the consumer journey,” Seidu said.
Long-time digital media observer and experienced revenue executive in the digital world, Michael Hudes, observed, “Snap’s move to launch dynamic ads is a no brainer move for all of the obvious reasons and on the surface, far from innovative. The real question is how does Snap deliver a user experience that performs for a wide swath of brands and not just direct response – D to C – advertisers?”
In the period leading up to Facebook’s IPO many analysts doubted Facebook’s ability to monetize particularly in the mobile environment. But once Facebook demonstrated rising advertising revenue with good margins, the stock took off and has been a darling of Wall Street.
While Snap’s stock price has moved up considerably in the last year, as they increased revenue and demonstrated the value of their many US and European users, they are still trading below their high. Snap has other efforts underway to increase their advertising revenue, including an advertising network across many sites and apps, not limited to Snap properties.
Snap has continued to hire advertising sales people from some of the leading digital companies, like Facebook, Amazon AMZN, and Google. Snap continues to take more and more steps toward demonstrating they can grow their primary revenue stream – digital advertising.