Snapchat, the image messaging app, valued at $16bn, is finding it hard to gain traction with advertisers, who are concerned that the company’s hyped valuation may not justify its high ad prices. In addition, Snapchat lags insights on ad performance. Adding insult to injury, Fidelty Investments has since lowered the value of its stake in the company by 25%.
Snapchat launched video ads earlier this year
Advertisers haven’t had much success with their Snapchat campaigns. Toyota which launched its Camry and Corolla campaign earlier this year, remains unsure about the results and targeting features that Snapchat provides.
Despite Coca Cola’s first ads on Snapchat running unsuccessfully, with 75% of the audience skipping ahead, the company has been successful in running campaigns since and plans to continue.
General Electric was more positive and has agreed to run a second ad campaign during this Holiday season. Sydney Williams, Manager of Global Social Marketing, General Electric, says:
“I’m looking forward to Snapchat coming out with a little more in-depth analytics. [But] the numbers and engagement on the platform are staggering. This isn’t a platform that we can walk away from.”
Snapchat is working on establishing long lasting relationships with larger brands, but wants to avoid spamming its users with ads.
Tom Edwards, Chief Digital Officer, Epsilon, an ad agency, said that many of its clients were considering Snapchat, but hadn’t actually committed:
“Snapchat fits into that 10% to 20% of a marketing budget that is for experimentation only. The question is whether brands will continue paying the premium prices.”
And with some campaigns running at $500,000, the cost is high indeed. Similar worries concern the company’s revenue growth. With losses of $128m during 2014 and a revenue of only $3.1m, it has investors worried. It remains to be seen if the company can expand its ad business over time. If it’s successful, the payoff could be huge.