Snap CEO, Even Spiegel, was critical of “super personal targeted ads” as recently as 2016, so it was a bit of a surprise when news broke that the then social-media darling was developing its own ad network.
Or was it a surprise?
Growing up during the age of “necessary profitability,” advertising on Snapchat was an inevitability. The real surprise was that they took so long to show up.
Understandably, the announcement of the network — dubbed the Snap Audience Network — created plenty of buzz.
The network “will exist beyond Snapchat’s own platform and allow marketers to target users across a variety of apps,” wrote Marty Swant at AdWeek. “The move is part of a broader push by the company to better scale its advertising business, which over the past two years has shifted from a primarily direct-sale model to one that’s primarily programmatic.”
In other words, the announcement of the Audience Network was more than a new advertising channel.
The Audience Network signaled a shift in Snap’s ad business, bringing self-service (i.e., programmatic advertising) into the mix, using customer data in ways the company has shied away from in the past, and an expansion from its own user base.
The response to the announcement was largely favorable — Snap stock rose 9 percent in the days following the presentation.
But what else can the new ad network mean?
Snap Audience Network: New But Untested Opportunity for Brands, Apps and Snap
The new Audience Network is essentially a win/win/win scenario, provided it delivers.
It’s a win for advertisers, with more targeted reach to a larger audience. It’s a win for app developers, with access to advertisers on a programmatic exchange. And it’s a win for Snap, with a brand-spanking new source of revenue.
According to Kurt Wagner at Vox, it’s a way for Snap to grow its business without adding new users to the flagship social platform — something Snapchat has struggled with in the past. “Snap is trying to take the next step to become a more established advertising business,” writes Wagner. “But announcing that plan is one thing; we’ll see if Snap can execute.”
At the time, the main concern was that Snap wouldn’t be sharing personal or identifiable information in user data, leaving some to question how targeted, personalized ads will be possible with the ad network.
Remember: Access to first-party data is a major draw for advertisers, especially as third-party cookies fade.
“If Snap is not sharing data with its ad partners, those ad partners will have to share data back to Snap so it knows who it is targeting,” concludes Wagner. Suffice it to say details are sparse.
Snap has since expanded its advertising capabilities, enabling brands to place ads outside of Snapchat’s walls. Facebook launched a similar network in 2014.
Fast-forward a few years, and the decision to introduce ads appears to be paying off.
In 2021, Snapchat drove over $3.1 billion in advertising revenue—a number that’s expected to approach $6b by 2026.
It hasn’t been all smooth sailing, though.
Apple’s iOS 14 update caused the entire social ecosystem to shutter in fear.
Because millions of iPhone users could now ask apps not to track them, making measurement and attribution on the world’s most popular smartphone a nightmare.
Leading up to the update, Snap CFO Derek Andersen said, “It is not yet clear what the longer term impact of those changes may be for the topline momentum of our business and this may not be clear until several months or more after the changes are implemented.”
More recently, Spiegel spoke about the turbulence in 2022, saying, “It seems like advertising demand hasn’t really improved, but it hasn’t gotten significantly worse either. Our partners are just managing their spend very cautiously so they can react quickly to any changes in the environment.”
This isn’t an inherently Snapchat problem. Google parent Alphabet announced in its Q4 2022 earnings that it fell short of expectations on revenue and earnings per share due mainly to a decline in ad revenue.
Which Brands Bought Snapchat Ads in 2022?
We pulled data from 190 companies (396 brands) that bought ads on Snapchat in Q1 2022.
Of them, 46% and 27% (184 and 52) didn’t buy Snapchat ads in 2020 or 2021.
That said, 47% of the companies we looked at had bought Snapchat ads, indicating the stickiness of the platform’s ad products.
Q1 2022 Snapchat advertising top categories
Media & Entertainment: These advertisers increased spending by 20% in Q1, thanks largely to Amazon upping its ad investment in its Prime streaming service, Audible and Twitch TV. At the same time, Paramount decreased its budget by 19% QoQ.
Apparel: Apparel advertisers spent 25% more in Q1 than they did during the same quarter last year. Kering (Balenciaga and Gucci) and VF (Vans and Timberland) led this charge, boosting their investments by 116% and 308%, respectively.
Tech: Tech advertisers increased spending by 3% QoQ in the first quarter of 2022. While spending from Samsung was down by 66%, Apple (beats Earbuds, iPhone and iPad) helped offset this with an increase of almost 1,000%.
Pharma: Pharma advertisers decreased spending by 29% QoQ, largely due to advertisers for Procter & Gamble decreasing their budget by 95%. Meanwhile, advertisers for Novartis increased spending by more than 100x QoQ to promote Kesimpta.
As long as people are opening Snapchat 40 times a day, ad dollars will follow.
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