Snapchat CEO Evan Spiegel has described both in-app
purchases and native advertising as potential revenue streams for
the mobile messaging service, which lets users send private
messages in the form of photos and videos that vanish within 10
seconds of being opened.
In light of the amount of revenue it will have to generate to
support the valuation it's seeking, Snapchat's eventual courtship
of Madison Avenue seems inevitable. But if the product is anything
like its current form when the two-year-old company does get around
to wooing advertisers, it's going to have a lot of questions to
answer, like just how prevalent "sexting" and cyber-bullying really
are on the network.
"I struggle to think of any of our clients who would be willing
to even pilot advertising on Snapchat," said Rich Guest, president
Worldwide's U.S. operations.
Another fundamental question is what Snapchat's actual reach is. To
convey its growth, the company announced in September that its
users were sending 350 million "snaps" -- or vanishing photo and
video messages -- daily, up from 200 million in June. But it hasn't
disclosed how many unique users it has or what portion of them are
teenagers -- the demographic that's believed to dominate the
And then there's the issue of data. Snapchat collects users'
email addresses, birth dates and mobile phone numbers when they
register for an account, but aside from that, it doesn't know
anything about them. As part of its privacy value proposition, it
deletes users' messages from its servers after they've been
"What's compelling about Facebook or Pinterest or Twitter is
that, by virtue of the way I use these tools, the network learns a
lot more about me," said Scott Hess, senior VP-human intelligence
for Spark SMG. "[But] Snapchat, through me consuming a bit of
media, is not robustly profiling me."
While Snapchat is frequently described as a social-networking
app, its utility is more akin to messaging services like WhatsApp
and Japan-based Line. The point is to serve as a medium for private
messaging between friends, not to be a diffuse social graph like
Facebook or an interest graph like Twitter.
The intimacy of private messaging makes advertising more awkward
to insert, and those competitors have sought other ways to generate
revenue. WhatsApp gives its users a year for free, then charges
them a 99-cent annual fee. Line makes money from sponsored
"stickers" (essentially embellished emoticons), but the majority of
second-quarter revenue came from purchases within games that
can be played in the app.
"None of [Snapchat's] competitors have demonstrated that there's
a real viable advertising model in similar services," Mr. Guest of
Tribal Worldwide said.
Snapchat didn't respond to a request for comment.
Brands on Snapchat
Madison Avenue is bound to put Snapchat through its paces if and
when the company comes calling, particularly millennial-focused
A handful of brands like 16 Handles and the New Orleans Saints
have already created Snapchat handles and dabbled with organic
messaging to users, but the most notable example of a big marketer
to do so is Taco Bell.
From a paid media perspective, a brand that's versed in
storytelling like a Red Bull, a Nike, or a Super Bowl
advertiser looking to extend its story with exclusive content might
find Snapchat compelling, said Chris Copeland, CEO of GroupM Next. That is, if the notoriously
fickle teenaged user base that throngs to Snapchat stays put.
"If you're a brand that believes in great storytelling on
creative canvases, I think there are a lot of plays here," Mr.
Meanwhile, a recently added Snapchat feature, "stories," could
provide a more seamless entry for sponsored content.
Unlike snaps, which are sent from one user to another, stories
(which can be stitched together from multiple snaps) appear beside
users' handles in someone's list of friends, stay visible for 24
hours, and can be replayed as often as someone likes in that
There's the option of making stories visible to just friends, a
custom list, or "everyone" on Snapchat -- an option that creates
the semblance of a public profile on what's been a private service.
It's a development that could give brands more of an incentive to
have a presence on the network.
Stories might be an interesting ad product for a movie studio or
record label that's looking to do a big publicity push in a short
window of time, according to Tyler Willis, VP-business development
at the social-ads company Unified. The notion of promoted snaps --
where brands could message users directly -- also seems plausible,
although more likely to be an expensive buy in the vein of a
home-page takeover, he said.
"I think a lot of early [advertiser] adopters will be musicians
and movies and entertainment brands," Mr. Willis said. "That's the
lowest-hanging fruit for Snapchat, given their user base is a