850 mn users, no advertiser FOMO: Unpacking Snapchat's marketing paradox

Despite boasting a solid user base globally and in India, the social media platform is struggling with rivals in ad biz. Experts discuss why that is.

Snap Inc., the parent company of popular social media platform Snapchat, is gearing up for a significant overhaul of its advertising strategy, as revealed by CEO Evan Spiegel in a recent internal memo. The Santa Monica-based tech firm is set to diversify its advertising offerings, with a particular focus on leveraging augmented reality (AR) technology to bolster its market position against formidable rivals.

Spiegel announced the imminent launch of "Sponsored Snaps," a novel ad placement option designed to appear in users' chat inboxes as new Snaps without push notifications. "This allows advertisers to engage prospective customers all the way down the funnel within a single ad unit; raise awareness with broad reach in the chat inbox, improve consideration with people who choose to view the Snap, and drive conversion with an in-message call-to-action," Spiegel elucidated.

Snapchat's battle for the ad market share

The strategic pivot comes at a critical juncture for Snap as the company grapples with underwhelming financial performance and dwindling advertiser interest. Despite Snapchat's popularity among younger demographics, the platform has struggled to convert its user base into a robust advertising revenue stream. In 2023, Snap's ad revenue stood at $4.6 billion, paling in comparison to Meta's staggering $131 billion in ad revenue across its platforms for the same period.

The platforms' respective user bases further highlight this stark disparity in advertising prowess. As of 2023, Snapchat boasts approximately 850 million monthly active users globally.  

In India, Snapchat has over 200 million monthly active users, which is the largest user base for the company in the world, followed by the United States.

The Demographic Dilemma: Blessing or curse?

Kushal Sanghvi, a seasoned digital media strategist and advisor, points out the crux of Snap's predicament: "While platforms like Meta and Google have built ecosystems that attract significant advertising spend, Snapchat is still catering to a specific segment of the population." Sanghvi notes that despite Snapchat's growth, particularly after TikTok's exit from the Indian market, its active user base in India is insufficient to compete with the broader reach of other platforms.

The platform's demographic skew towards younger audiences, particularly those aged 15 to 24, presents both opportunities and challenges. While this concentration allows for targeted marketing to Gen Z consumers, it also limits Snapchat's appeal to brands seeking a more diverse audience.

Technical Hurdles: The analytics gap

Shradha Agarwal, co-founder and global CEO of Grapes Worldwide, offers a deep dive into the technical challenges facing Snapchat's advertising ecosystem. "Though Snapchat enjoys a massive user base in India, it is unable to attract brands, primarily due to its inability to portray relevance in the market," Agarwal explains. "Brands are unable to recognise any immediate value coming from Snapchat ads, and many times they are also at a loss on how to navigate the landscape of the platform to drive optimal results."

She highlights a critical issue affecting Snapchat's advertising efforts: the lack of sophisticated measurement tools. "Brands find it difficult to convert the ads, as the platform lacks the necessary sophisticated measurement tools. This forms a disconnect with the broader ad industry, as Snapchat is unable to give a proper insight into the ROI," Agarwal elaborates.

This deficiency in analytics and performance metrics puts Snapchat at a significant disadvantage compared to more established platforms. "There is a need to improve the advertising analytics and enhance the model for ad performance," she suggests. "The platform should focus on driving Estimated Conversions and enhance the probability of quality results with the help of click-through conversions."

The technical limitations of Snapchat's advertising platform extend beyond mere analytics. Siddharth Devnani, co-founder & director of SoCheers, a digital marketing agency, seconds Sanghvi's point on Snap's young consumer base, and explains how it also affects the category of brands that platform could potentially attract. He says, "Snapchat has recently grown fast, especially in the younger age groups. Younger audiences mean less spending power - which makes planners wary of spending, in many categories. However, advertisers targeting these cohorts and brands looking at reaching out to audiences over longer periods of outreach see this as an advantage."

Despite these challenges, Snapchat isn't without its strengths. The platform's ad formats and AR capabilities set it apart in the crowded social media landscape. Sanghvi acknowledges that "Snapchat has introduced several new features and formats that go beyond traditional advertising. The platform allows brands to create larger-than-life experiences, which are visually engaging and creative."

Furthermore, Devnani also expands on Snap's advertising ecosystem, saying, "The ad product of Snapchat is fantastic - it's pretty much there in terms of features offered to advertisers. Ad formats are crucial and they are constantly innovating and pushing the bar."

Recognising the need to capitalise on these strengths, Snap is doubling down on its investment in AR technology. Spiegel's memo emphasises the company's commitment to developing AR glasses, stating, "We are investing in creating augmented reality glasses that allow people to interact with computing, the world, and one another in totally new ways." This push towards AR aligns with broader industry trends, mirroring similar efforts by tech giant Meta (with its Quest series and recent Ray-Ban collaboration), and even Apple, who unveiled Vision Pro last year.

Experts suggest that these efforts, combined with Snapchat's existing strengths in AR and innovative ad formats, could help the platform carve out a larger piece of the pie in the digital advertising ecosystem.