Beware the ire of teenagers. This week, Snapchat introduced unskippable ads to its app.
The six-second adverts, which Snapchat first announced in April, finally rolled out to users who watch content from professional producers in the app’s Discover section on Monday. The change brings Snapchat in line with other video-based social networks, including YouTube, which has unskippable ‘midroll’ ads in the middle of content. And Facebook, which has been pushing video advertising hard for well over a year.
Snapchat has made the move for one simple reason: money. “This is a play to drive up their revenue by forcing people to watch,” says Ilan Nass, an analyst at social media marketing agency Taktical Digital.
The timing of the decision, following the announcement by Snap of disappointing first-quarter results, is also an attempt to bolster its reputation. While the company increased its revenue by 54 per cent year-on-year, it was down from a 72 per cent increase in the last three months of 2017. The app added four million users in the first quarter of this year – though that compares poorly to the nine million it attracted three months earlier. The company’s stock fell to $10 per share; it has previously reached highs three times that number.
“It’s clear they’re losing market share to Facebook and Twitter, which is resurgent, and YouTube,” explains Victor Anthony, an analyst at Aegis Capital, an investment bank. “If you have skippable ads, the advertiser doesn’t necessarily have to pay for them.”
If a user manages to skip past an advert within a second – as used to be possible on Snapchat, where ads stuck out like a sore thumb compared to other content – the company serving that advert can’t charge advertisers for displaying it to customers. Big firms looking to place online adverts want to make sure they get seen - not skipped. “By preventing the user skipping the ad, you force the impression,” says Nass.
However, the solution to Snapchat’s problem of people skipping ads is a blunt tool. Just because people have to watch an advert doesn’t mean they’ll actively engage with what’s being advertised. The action could perversely have the opposite impact, driving users away. “It remains to be seen whether or not Snapchat’s unskippable ads cause conversions or sales to come,” says Nass.
And the company better be careful. A recent app redesign was met by anger and indifference from users and Snapchat has now introduced an update (for the moment, available on iOS only) in a bid to remedy the situation. The update will put everything in chronological order – just like it was before. Conversations with friends will also return to the original right-hand side position of the screen.
The new adverts feature might, however, encourage larger companies, usually assured of sales regardless of how they advertise, to take a chance on getting their name out there on the platform. “If you’re a big brand like Coca-Cola, your goal is less about driving direct sales and more about branding,” says Nass. “If you’re Coca-Cola, you’re thrilled about this.”
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Forcing people to watch adverts also increases the ability for Snapchat to sell advertising rates based on different demographics. If a certain proportion of users who ordinarily skip every ad cannot do so anymore, Snapchat can then sell to specific slices of users thanks to strength in numbers.
In all, the move is likely to allow Snapchat to significantly increase the cost per thousand impressions (CPM) rate it charges advertisers, says Derek Rubinstein, Taktical’s expert on Snap. Until six months ago, Snapchat was charging an average CPM of around $3 to $8, before it dropped its rates to compete with other social networks. Now it can return to those sorts of prices. “They can justify increasing those costs because unskippable ads are more attractive for advertisers,” says Rubinstein.
At the same time, Snap is doubling down on its much-maligned Snap Spectacles, releasing a new version of the sunglasses that could upload images and video to the app. But industry onlookers are far from impressed. “It was a flop the first time round, and I think it’ll be a flop again,” says Anthony.
This article was originally published by WIRED UK
