There’s a fascinating story unraveling in the advertising world that needs to be talked about. Snapchat hasn’t announced this yet, so let me do it for them:
“The slow-cooker is on, and when the buzzer beeps, it’s full on war with Facebook.”
You’re probably saying to yourself, “What the hell is he talking about? What is this metaphorical slow-cooker you speak of?” Well, allow me to explain...
When Evan Spiegel (CEO of Snapchat) turned down a $3 billion buyout offer from Facebook’s Mark Zuckerberg in 2013, people were shocked.
"If you look at it solely from a monetary perspective, yes, they're absolutely foolish." - Brian Solis
“Snapchat, it behooves me to point out, makes no money.” - Slate
“Snapchat Spurned $3 Billion Acquisition Offer” - The Wall Street Journal
These were just a few of the initial criticisms surrounding the failed deal.
By May 2015, however, the 4-year old “sexting app for teenagers” surpassed 85 Million users. Snapchat was growing into a top 5 social network (along with Instagram, Facebook, Twitter, and Pinterest), and venture capitalists throughout the country scrambled to make sense of a new, astronomical $16 billion valuation.
Yet the same question kept circulating amongst investors:
“Yes, I understand teenagers love the product, but how in the hell does Snapchat plan to make money?”
At first, the concept of Snapchat as a “platform for advertising” was a hard one to grasp. The 13-35 year old demo (the majority of Snapchat’s users) are disinterested and unaffected by traditional banner ads. In marketing, we call this banner-blindness. I am confident that even if you, the savvy reader, REAAAAAALLLLY tried, you could not remember the last 3 banner ads that reached you. Snapchat recognized this tendency too.
Throughout all the doubt and criticism during Snapchat’s rise, Evan Spiegel assured users and investors that when they finally introduced their advertising platform, it would be like no ad-unit anyone had ever seen before - and he was right.
In February 2016, Spiegel and his team in Venice Beach, California, released the ad-unit that we in the advertising world had been waiting for. They called it: The Snapchat Geo-Filter.
The Tech Behind the Geo-Filter
Creating a Geo-Filter for your brand or even for personal use is really simple (the whole process can take under 20-minutes).
Design Your Geo-Filter
Upload the Filter to Snapchat
Choose Your Geo-Fence*
Set the Time / Date for Filter to Run
Launch Filter and Analyze Data
There are many blogs that have gone into great detail on mastering each of these steps above...
But the real magic the thing we should be paying attention to the most, is this concept of geo-fencing: advertising real-estate in a 'virtual world.'
“Wait, what? Advertising Real Estate in a Virtual World? Sounds made up….(and boring)”
But it’s NOT! It’s revolutionary and something that no marketer has seen since the launch of Google AdWords in 2000. The reason AdWords was such an exciting channel for advertisers was because it was so un-tapped AND so vast, and the intersection of these two elements is crucial to remember.
Untapped & Vast
When channels are untapped and vast, it gives marketers a huge leg-up on their competition. In fact, it’s very similar to the concept of settling new land. Take for example the early gold miners who came to California in the 1800s. When the Miners first showed up to San Francisco, there was so much untapped land, and so few other settlers, that they were able to control the best real estate they could find for the cheapest relative prices.
This is precisely what is happening on Snapchat: a virtual California Gold Rush. Their team has built a Geo-Layer on top of their app that essentially lets anyone buy virtual real estate anywhere in the US, UK, and Canada for very cheap (starting at $5 per 20,000 square feet)!
Why is This Important Again?
The early success of Snapchat’s Geo-Filters are important for 2 reasons:
Platform > Fad Social App - The revenue generated from the Geo-Filters (and other ad-unit successes) solidified Snapchat’s position as a true platform (not just a Fad Social App). With over $1.8 billion in additional funding in the late weeks of May 2016, it would appear that investors also seem to agree.
Facebook is Watching - Snapchat has woken the beast. There’s no denying it.
It was clear in 2012 when Facebook launched half-assed Poke (a Snapchat competitor). It was clear in 2013 when Facebook offered Evan Spiegal $3 billion to acquire Snapchat. And now….in 2016, it’s clear that Facebook will unleash its own type of Geo-Ad unit.
Only THIS ad-unit won’t live on your mobile phone. It will live in the Virtual World.
Oh yeah! I’m talking about the Oculus Rift (the Virtual Reality company that Facebook paid $2 billion to acquire in 2014).
The Oculus Rift phenomenon brings so much innovation and possibility to the advertising world, that it is still way too early to truly understand it’s impact on our industry.
At CoEfficient Labs, we’ve managed over $3 million in advertising spend on Facebook’s Platform this year, and there’s one thing I’m sure of: Facebook is not going down without a fight.
If you haven’t noticed, Facebook shattered market expectations in Q1 2016.
Why is this happening?
Because Facebook has the single best targeting platform of any advertising channel in the world. And guess what, this targeting, is going to be applied to the Oculus Rift and their Virtual Reality hardware. Like Snapchat’s Geo-Fenced ad-unit, Facebook’s Oculus Rift brings a brand new channel for marketers that is both untapped AND vast.
These are the pillars for a hyper-growth advertising platform.
Snapchat is a private company, so it’s hard to really know for sure. Yet history has shown that where attention goes, advertising is sure to follow. In observing the social media habits of recent college graduates one thing is clear: they are not on Facebook, they are on Snapchat. With that said, right now, today, there is no better platform in the world to advertise on than Facebook. Currently, Facebook advertising has the best Return-On-Investment in the business.
But here’s where my prediction takes a turn. If you’re looking at Facebook vs Snapchat as a straight up advertising war, you’d be missing a huge piece of what makes Snapchat worth the $18+ billion it’s valued at today.
Advertisers aren’t the only ones paying for Snapchat Geo-Filters. This is a unique advantage that Snapchat has over Facebook and Google. Men, women, and teenagers alike are creating Geo-Filters for things like weddings, conferences, sweet 16’s, bachelorette parties, and other special events. It’s not just a platform for advertisers, it’s a platform for everyone. Snapchat is essentially double-dipping their ad revenue on a two-sided market. Not only are they drawing in thousands of advertisers by the day, but they also have an army of users buying filters for special events and lifetime adventures.
Right now, as this epic battle for advertising dollars continues to rage, my vote goes toward the establishment: Facebook. Facebook has the platform, the investment backing, and the vision toward the future. However, in Snapchat, one sees a company who has defied all odds, built an innovative new ad space, and attracted the young demo that is capable of propelling it beyond its counterpart. I am not one to count them out, and only time will tell how this power struggle will unfold.