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Snap off to a flyer but questions remain

News, 03 March 2017
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NEW YORK: Shares in Snap closed at $24.48 after the first day of trading on the New York Stock Exchange yesterday, up 44% on the IPO price and valuing the business at around $33bn, but leading agency figures were cautious about its future success as an ad platform.

Snap describes itself as a camera company but its Snapchat messaging app is where investors anticipate it will make money via advertising, thanks to the app's popularity with the sought-after millennial demographic.

"The platform has followed a familiar path of driving consumer engagement, forging media partnerships and building an audience," noted Mark Read, global CEO at Wunderman, who told Ad Exchanger he expected some "false starts" before Snap worked out how best to bring brands on the platform without disrupting the user experience.

"The short-term issue is whether they can deliver to marketers without alienating a fickle audience," he said. "Marketers will give them a break because they can experiment, but as their budgets become more real, Snapchat will have to prove ROI."

Digital metrics have become a major issue for advertisers, especially since Marc Pritchard, chief brand officer at Procter & Gamble, announced that all media suppliers to the FMCG giant would have to adopt MRC-accredited, third-party verification during 2017.

Within the past month, both Facebook and YouTube have agreed to be audited by the Media Ratings Council, and that body is reported to have talked with Pinterest and Twitter about a similar process; it's not known whether Snap has also been approached.

The other major issue facing Snapchat is that some of its unique features have been copied by rivals like Instagram. Not only must it guard against that being repeated in future, said Maikel O'Hanlan, VP of social strategy and relationship marketing, Horizon Media, it needs to ensure that "it can grow while retaining its exclusivity factor, that message distribution and visibility don't prevent brand reach and that a hipper platform doesn't come along soon".

Those investors buying stock were confident. "The most important thing to know about Snapchat is that we are moving to a world that emphasizes pictures over words," said Sean Stiefel, a portfolio manager at Navy Capital. "Snapchat is proven to be a leader in this field that is at its infancy," he told the Financial Times.

Data sourced from Ad Exchanger, Financial Times, Wall Street Journal; additional content by Warc staff

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