Snapchat’s API Launch: Preparing for an IPO?

Snapchat API, API Launch, Third Party Data, Snapchat Advertising

Snapchat may be synonymous with puppy-face filters and animated geotags, but the social media giant has officially announced the launch of their advertising application-programming interface (API). Snapchat’s API launch means that ad inventory will now be available to third party media service providers like Katana.

The digital advertising industry is already a veteran to automated purchasing platforms, but with the introduction of a Snapchat API, brands will be able to create their own ads and leverage programmatic technology for Snapchat ad placement. By handing over the reins, brands will be able to reach their audience using their own customized, proprietary targeting formulas – a concern that has previously frustrated Snapchat advertisers. Recently, Snapchat introduced age, gender, location, device, operating system, carrier and content affinity to its menu of targeting capabilities.

At Katana, we have already anticipated the possibilities of integrating first and third party data into the targeting equation. For example, for one of our home appliance clients, we combined their customer data base into our data management platform (DMP) to curate personalized ads. With the arrival of the new Snapchat API, we are playing with the opportunity to geo-target existing customers when they are in proximity of partnering retail outlets that carry their brand’s products.

Unlike Facebook’s 1.09 billion users, Snapchat only has a following of 100 million daily users, yet the app boasts a 5x higher engagement rate in contrast to its social media counterparts. Snapchat advertising hones the ability to truly engage users with interactive content, so much so that Snapchatters spend 20 seconds toying with a Sponsored Lens. Seventy percent of consumers want to learn about a product or service through content instead of ads, and Snapchat has really monetized on this asset. A recent study conducted by MediaScience found that Snapchat ads fostered twice the visual attention of Facebook and nurtured greater emotional response and purchase intent than TV.

In spring, Snapchat introduced auto-advance stories, a feature that allows users to skip over advertising content and continue watching their friends’ stories. Now, much to Snapchat (users’) chagrin, there will be advertisements between their friends’ messages. However, Peter Sellis, Snapchat’s head of monetization product, assures that users won’t be bulldozed with invasive content, claiming that the ad experience and load will be considered.

With advertising sales more accessible, we predict that more brands will experiment with Snapchat. Analyzing historical trends alone, the Snapchat landscape has already welcomed an increase in brand usage, averaging 26 posts per week in comparison to Instagram’s seven. Further, Snapchat reaches a coveted 41% of American consumers 18-34 on a daily basis. With such a prominent sector on Snapchat, it is possible that millennial-targeted brands will refocus their ad budgets to Snapchat instead of TV.

The release date for Snapchat’s new advertising platform has yet to be announced, but brands such as Universal Pictures, Paramount Pictures and Verizon have initiated a partnership. Traditionally Snapchat’s premium ad placement is priced on a cost-per-thousand-impression (CPM) basis, but with the introduction of more video time, brands can enjoy a slightly cheaper price tag.    

In just 18 months, Snapchat introduced advertising options that have been able to steal share from other mediums. Last month, TechCrunch published leaked financial documents that outlined Snapchat’s aggressive revenue projections. By 2017, Snapchat forecasts its revenue to be between $500 million and $1 billion. Perhaps the new API is an ambitious push towards an initial public offer?