The social media giant is offering brands free trials of products and discounts on some of its new advertiser tools, Business Insider reports, citing conversations with ad agency executives. The move shows that Instagram is making a serious effort to get brands to spend their ad dollars on its platform, instead of on Snapchat. Morgan Stanley reaffirmed this notion in a note to clients on Tuesday.
"We believe Instagram is likely to be more disruptive than previously expected as our industry conversations indicate that Instagram is giving advertisers sponsored lenses for free," said Morgan Stanley analyst Brian Nowak.
Sponsored lenses, which both Snap and Instagram offer, superimpose special effects over people's faces. In the case of ads, the lenses might advertise a new product or events, such as when Taco Bell's lens on Snapchat turned people's heads into a taco for Cinco de Mayo.
Instagram's latest attack couldn't come at a worse time for the Snapchat parent company. Morgan Stanley and Cowen -- two of the underwriting banks that helped take it public -- issued downgrades on Snap's stock this week, the latest stark example of Wall Street analysts beginning to lose confidence in the company. Both firms cited concerns about the health of Snap's ad business as the big reason behind their downgrades.
Shares of Snap were falling 1.7% to $15.42 early Friday afternoon, close to an all-time low. Snap had a particularly rough time this week, with the stock slipping below its $17 IPO price for the first time on Monday. Shares have fallen 11% over the past five trading sessions, while the stock has tumbled roughly 37% so far this year.
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So far, Instagram has been able to handicap Snap's growth by copying its Stories product, interactive lenses and other features. This time it's using another strategy.