Snap Inc is preparing for an initial public offering (IPO) of 25 billion as early as March, which can make it the highest-profile share debut in years. Snapchat’s business has been growing- the company is expected to meet its 350 million revenue target for this year.
So far, half of the company’s revenue has been generated from its Discover and Stories section, changed to Story Playlist earlier this October. The section features a daily mix of text and video stories of big publishers, like CNN, National Geographic, Cosmopolitan, etc. Up until now, any company interested in advertising on Snapchat had to work directly with their ad sales team. That kept the user experience relatively ad-free, which is always good. However, this has also limited the company’s revenue, which is not very good for Snapchat.
This month, Snapchat officially launched its ads API- application programming interface, allowing third-party partners to plug into the app and deliver ads for brands and agencies. The technology will let Snapchat fill more ad inventory quicker than selling it via a sales team, as until now. This is also known as programmatic advertising, basically the automated buying and selling of ads. Companies like Facebook, Instagram and Twitter are already offering similar APIs. In terms of targeting- Snapchat has explained that it will allow email matching- this is when Snapchats allows a brand to use its own customer list and find those people when they are using Snapchat. In addition, the company has also been interest in based targeting, as well as the ability to construct models that are used to find similar customers for a specific ad campaign. There is also a rumour that Snapchat is working on other kinds of sophisticated targeting, like sequential messaging. This is a form of retargeting, which sends users new ads, after they had initially been exposed to earlier adds.
The launching of new ways for companies to target Snapchat’s users is opening new opportunities for the company, in terms of growth and revenues. The API adds will allow Snapchat’s business to grow quicker, and reach its target revenue of 1 billion by 2017. In addition, Snapchat’s ads becoming API has also been considered a classic pre-IPO move- the revenue of the company is increasing due to the API, which will consequently make the company more valuable in the eyes of investors.
Possible cause for concern
When a company is considering an IPO, one of the main things investors look at is the competitive landscape. In the case of Snapchat, Instagram Stories can be considered the main direct competitor, as the new functionality offered by Instagram offers essentially the same product as Snapchat. Instagram Stories has around 100 million active daily users, which is more than half of Snapchat’s 150 million daily active users.
Should Snapchat be worried about Instagram Stories? Probably not in the time being, as its popularity among millennials has only been increasing in the last 4 years.
Sources:
http://adage.com/article/digital/inside-snapchat-s-ad-delivery-system/306172/
