Snapchat Announces Ad Business but Is It Time Up for Third-Party Targeting?

On Thursday 4^th April 2019 Snap Inc, which owns Snapchat, announced that it is building a mobile ad network. The announcement came at its first ever partner conference, akin to – but much smaller than – the developer conferences run by Facebook, Google and Apple each year.

It is a move designed to grow revenue for Snapchat by expanding the distribution of its ad messaging network on behalf of its clients, without having to grow the Snapchat user base itself. It is strategically derived from the way that Google and Facebook have built their ad businesses with great success.

Arguably, it is also a move that is out-of-step with how marketing paradigms are evolving in this more mature digital content economy.

Third-party data

There is an inherent tension between data privacy, a concept currently top of mind in the media landscape, and the data required for hyper-targeted, supposedly relevant, messaging to reach the ‘right’ audiences.

Facebook, in building its ad-targetting behemoth, had traditionally gathered Facebook user data for advertisers that were using its self-serve ad tool, and made that data available via its Partner Categories targeting functionality.

Following the Cambridge Analytica scandal the social network removed Partner Categories. GDPR coming into effect last May has meant that many other platforms and services have similarly ceased making their first party user data available to advertisers in this way.

The Snap Audience Network (SAN) will be built to enable advertisers to take their ads beyond the Snapchat userbase and into third party apps – with their own third party user data. Snap Inc executives told reporters that “the Snap Audience Network would offer more privacy than traditional ad networks”, but did not share any information about what kind of data it would use to target users outside of Snapchat.

Data privacy

The Apple Services launch in Cupertino on March 25^th included multiple references to data privacy as a key pillar of its ubiquitous brand hitherto and even more so going forward. Talking about Apple News Plus, Tim Cook discussed that Apple does not track user data – it is simply not what Apple is about, and as such this is a value add for consumers.

Apple is almost unique in the digital content economy in terms of how it has claimed to treat user data, as well as the fact that none of its products or services (with the notable exception of the App Store) have ads. It is not yet clear how much this prioritisation of privacy will influence consumers to choose or remain with Apple. What is clear is that businesses and regulators perceive this to be a pressing issue.

New advertising paradigms

Snap Inc’s announcement of SAN is evidence of the fact that its leadership perceives a large revenue growth opportunity in exercising advertising reach via third party apps. Yet there are many signs that advertising is undergoing a fundamental rewiring as the digital content economy matures.

The emergence of the digital content economy was characterised initially by a feverent rush by advertisers to find and track more people online more precisely than ever before, and seek to interrupt and intercept content which these users had otherwise self-selected, e.g. via Facebook in-feed ads, display ads, YouTube pre-rolls etc.

As the digital content economy matures, it is characterised by hyper-lean-in audiences – who have, literally, crafted their entire digital content ecosystems and choose when and in what format they engage with this content, e.g. podcasts and brand pages on social media. These audiences are also less accustomed to experiencing interruptive ads as they spend less time on linear TV and more time with ad-free music and video services.

The price of targeting these users and interrupting their content experiences are high. Snapchat’s move is all about serving ads. Whereas, the most successful ads are those that court consumer attention as opposed to seize it. These ads are hybrids of advertisement and content and take the form largely at the moment of podcast sponsorships and social media influencer content. Though in their infant stages, these ad ecosystems are the foundation for a new co-creational ‘branded content’ ecosystem being birthed.

Snapchat, compared with Facebook, Instagram and Twitter, is the social platform with the highest concentration of users that follow their favourite bands (49% compared with 43% on Instagram and 29% on Facebook); the highest concentration of users that follow their favourite celebrities (48% compared with 42% on Instagram and 27% on Facebook) and follow their favourite brands on social media (42% compared with 37% on Instagram and 24% on Facebook). Rather than expanding targeting and getting further into the quagmire of third party data, Snapchat should be building a more robust influencer marketing ecosystem, from which it also gains a portion of the brand money funnelled to influencers as well as ensuring that, like Instagram, there is seamless ecommerce functionality.