Tania Yuki, CEO of Shareablee considers Snapchat’s runmoured plans to introduce 3-second skippable ads.
It was recently reported that Snapchat might experiment with making its users sit through 3-second commercials before offering a ‘Skip’ option in order to increase view times on ads. If this does indeed happen, that would mark a significant shift in how the nascent company views advertising.
Since its inception, the social app has shied away from inserting intrusive ads into its users’ feeds, which may have been seen as a big plus for its younger consumers. Its popularity among youth audiences is impressive - comScore reported that Snapchat is the third most used app among 18-34-year-olds, trailing only Facebook in social platforms. And, according to data collected by Snapchat itself, users under the age of 25 spend over 30 minutes a day on the app and post an average of 20 Snaps per day.
However, after going public nine months ago, the company has seen its stock price swing wildly and is seeking a way to reassure Wall Street investors following a string of disappointing quarterly results. User growth has slowed well below Wall Street expectations, with 178m daily active users, and share is also being lost to Instagram, which is now up to 300m daily active users for its Stories feature. Only yesterday, it was reported that the company is laying off more than 20 employees, Snap has laid off two dozen employees today, including some from its branded content division,
Incorporating this new ad revenue strategy makes sense from a growth perspective especially following the disappointing sales for its Spectacles. In fact, in its most recent earnings report, Snapchat reported that its ad rates, the amount it charges advertisers per each impression, fell 60 per cent from the same time a year ago even while upping its ad sales efforts. But the real dilemma for Snapchat is how to balance what it currently owns - high user retention rates, super fun experiences and consumer love - with a monetization model that makes sense both for advertisers as well as for users. The joy that Snap creates in its highly engaged users needs to be protected at a premium.
Particularly as ad-free and limited commercial platforms like Netflix and Hulu become the main form of media consumption for younger consumers, tolerance for irrelevant or non-engaging ads is at an all-time low. Ultimately, testing and learning and doubling down on measurement seem to be at the core of what’s needed, because the results can be surprising. When full-length online video content from the major broadcasters first mainstreamed around 2009, they were loaded with two minutes of ads (compared to a commercial episode load of 16 minutes). I was at comScore at the time, and we ran some analysis on ad load sensitivity, and uncovered that the tolerance threshold was almost 4x higher for the average online video viewer. Yes it was lower for 18-24 year olds, but they could still tolerate approximately 3x more ads than were being served to them - so research is very important to ensure your assumptions are right at the outset.
If we do move to a 3-second non-skippable model, the ads for certain will have to be valuable - both Snapchat and its advertisers will need to create compelling content that is worth users time, rather than content that purely pushes a brand message or agenda. Snapchat has already proved that it has a compelling product that people enjoy. As it walks the tightrope of catering to both advertisers and users, the best bet is to create content that both sides enjoy, and to consistently test and learn, both in terms of creative appeal and effectiveness, as well as the correct thresholds and experiences, to create the optimal experience for its users.