The Snapchat parent company has rolled out a series of new ad tools over the past several months with the hope that more brands will start to consider it as a serious advertising destination, instead of an experiment. On Monday, the social media upstart introduced Snap Publisher, a new ad creation tool that's meant to make it easier for smaller brands to create campaigns on the app. Publisher is a video editing suite that gives advertisers templates to create ads and is accessible on a web browser.
Importantly, it also allows brands to turn any horizontal video or photo into a vertical video ad. In the past, some brands have cited Snapchat's vertical video format as an issue because they had to use expensive video software in order to make content specific for it. With Publisher, that's no longer the case.
Outside of creative tools, Snapchat has been beefing up its list of features that allow advertisers to get a better idea of how their campaigns are performing on the app and, in turn, whether or not they're making any money. The company released Snap to Store advertisements, which measure which ads are driving in-store traffic (which Snap's chief strategy officer Imran Khan called "the holy grail" of advertising data) and its self-serve Ad Manager, which lets brands buy and track ads.
Snap has also increasingly made and considered acquisitions that will help further improve what it can offer advertisers. The company has been shopping for startups in the marketing tech and ad tech sectors, Business Insider reports, citing sources close to the situation. The process reportedly involved Snap holding talks with AdRoll, a retargeting ad tech company. And last month, Snap scooped up Placed, a location analytics company, that will help it bolster its Snap to Store product.
"I think they are certainly trying to improve the data management to make sure advertisers understand that it's like 'Hey, if you come to us, you can get a pretty high return on investment,'" said Morningstar analyst Ali Mogharabi. "And they're not only trying to give a high ROI, but also a faster ROI. That's where AdRoll would fit in if it's the case that they approached them."
Snap has several good reasons to care about advertisers. The company is hoping it'll boost sales -- advertising revenue made up 96% of its top line in 2016 -- thereby appeasing the small group of Wall Street investors who still have faith in the stock. Morgan Stanley, one of the lead underwriters that helped take the company public, downgraded Snap's stock last week, saying that its ad business isn't growing as fast as the firm expected.
The downgrade was just the start of a bad week for Snap, as the stock sunk below its $17 IPO price for the first time, and bearish investors' concerns over growth and profitability continued to swell. Snap shares closed at $14.73 on Tuesday, a drop of nearly 50% from its highest point right after its IPO in early March.
Snap is also trying to hold off competition from Facebook Inc.'s (FB) - Get Report Instagram, who started off by copying Snap's Stories feature, but has moved onto attacking its ad business as of late.
Instagram already has many of the same ad tools as Snapchat, such as sponsored lenses, and is now offering brands free trials of products and discounts on some of its new ad tools. It's unclear if Snapchat, who has yet to become profitable and show that it can grow its business, offers free trials, but it has offered coupons and incentives to advertisers. Representatives from Snapchat declined to comment.
"It just shows the advantage that Facebook and Instagram have, in that they can afford to do this," Mogharabi said. "For Snap, it's not quite in their budget just yet."
Facebook and Alphabet Inc. (GOOGL) - Get Report built their ad empires by collecting massive amounts of user data, Mogharabi said. For Snap to keep pace with either of them, it needs to do the same, he added.
"They want to enhance their offering and be able to go up to advertisers with whom they're working and say 'We can provide you a platform that gives brand exposure like TV ads and also allow you to drill down on that specific user for a specific product," Mogharabi explained.
But tools like Publisher should lower the barrier of entry for brands to begin advertising on the platform. Until now, Snapchat had turned off many advertisers who were unable to test campaigns out on the platform before buying, said Nick Cicero, CEO of Delmondo, which produces, manages and measures ad content on Snapchat and other social platforms.
"Snapchat misses out on advertisers because they have to really sell based on belief in the platform," Cicero said. "You have to trust them and work closely with them. It's hard for advertisers to dedicate a big budget for Snapchat."
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