Snapchat ramps up UK pitch, but ad buyers remain unconvinced

Outside of the U.S., the U.K. is Snapchat’s most important market as the focal point of its international ad business. But for all the talent hired to its international headquarters in London last year and its subsequent efforts to transition Snapchat from a direct sales business to a self-serve platform, it hasn’t been enough to win more media spend. Ad buyers in the U.K. remain unconvinced by the ephemeral mobile messaging app’s ability to yield a significantly better return on spend for advertisers than Facebook and Instagram.

Having a U.K. office was meant to change those views, which remain largely unchanged from two years ago when the region became Snapchat’s first international market. At the time the U.K. was Snapchat’s second largest market for users with 11.2 million. Growth has been hard to come by in the years since, with a slight rise to around 14.8 million users logging into their Snapchat account at least once a month, per eMarketer.

While a large part of those users are young — nearly a third (31 percent) of them were aged between 18 and 24 years old last year, per eMarketer — Snapchat’s still isn’t big enough for many advertisers. Not only did updates to its self-serve tools and pixels make it easier to target and measure audiences on Snapchat, it also made them more comparable to the app’s largest, more established rivals. As much as Snapchat ad business grown up over the last two years, it’s still plagued by the same reach and viewability issues it had prior to opening an office in the U.K.

Viewability has long been an issue for advertisers on Snapchat where ads remain easily skippable, contributing to low viewability rates. One paid media director at a media agency said that he has seen viewability rates in the single digits. That may potentially be addressed by a new non-skippable ad format, which will start appearing on Snapchat in the U.K. during the second half of the year, said the exec, who noted that viewability measures for other parts of the platform like Snap Lenses and Snap Stories are satisfactory.

Snapchat still has work to do to make its ads more valuable. As explained by iCrossing’s planning director Maria Bain. “For the moment, our clients’ focus isn’t to reach the younger demographic users of Snapchat — other platforms offer slightly more robust targeting options.”

Transitioning from a direct sales business to a self-serve platform
Despite the lingering issues, there’s a sense among the seven ad buyers interviewed for this article that Snapchat is headed in the right direction in the U.K. — albeit slowly. All told, the ephemeral mobile messaging app had a good year in 2018 thanks in part to the arrival of the Snap Pixel. When it launched last summer, the pixel gave its ad business more clout as agencies could go to advertisers with more accurate data based on how Snapchat’s ads drive direct response clicks to websites. Deeper data on what actions Snapchat’s ads drove meant ad buyers could move away from last click attribution models.

But the influx of media budgets didn’t happen. For many advertisers, Snapchat is optional, not compulsory, on media plans. The numbers reflect this.

Between 2017 and 2018, Snapchat’s ad revenue grew by 79.7 percent but between 2018 and 2019 that rate slumped to 28.3 percent, per eMarketer. Snapchat’s ad business is slowing in the U.K where 80 percent of its users are aged 13- to 34 years old. Snap’s total 2018 revenue was $1.2 billion in 2018.

Not even the promise of lower CPMs as a result of less competition was enough to tempt large swaths of advertisers to change their view of the platform last year. But it wasn’t for lack of effort. Snapchat execs pushed the self serve auction model in the U.K. for much of 2018. So far this year it has run an invite-only program called “Snap Up” that encompassed a series of workshops and meetings designed to get advertisers bidding for Snap ads, Story ads, filters and lenses faster.

Snapchat’s impressions are now the cheapest of its peers, according to the ad buyers interviewed for this article. CPMs across Snapchat vary massively, with ad buyers seeing prices between £1.50 ($2.00) to £6.00 ($7.98) depending on the vertical.

On Facebook, advertisers buy CPMs at around £4.30 ($5.72) for ads in the News Feed, on Instagram, it’s around £4 (4.32) and on YouTube its £6 (7.98). It’s a decent return for those advertisers competing in the auctions. Prices have, however, have slowly risen over the last 12 months and ad buyers anticipate they will continue to do so in 2019.

“Snapchat’s CPMs are extremely competitive when compared to similar placements on other platforms, especially when considering associated down-funnel KPIs such as clicks, referrals and sales acquisitions,” Jeremy Rusling, paid social director iProspect U.K.

And yet Snapchat’s place on media plans is still up in the air for many advertisers. Advertisers seem less inclined to prioritize the platform’s younger audience when they can reach similar audiences and more on Instagram, which gained more users in 2017 than the mobile messaging app had in total. Indeed, clients are spending on Snapchat versus Facebook and Instagram combined at a ratio of 25 percent to 75 percent per £5 ($6.62) a day, said the head of investment at one of the network media agencies, said an agency executive on condition of anonymity.

“The CPA can be as much as 50 percent lower on Snapchat compared to Facebook, which is in part driven by the smaller but loyal audience they have,” said the agency exec.

Snapchat still isn’t attracting advertisers in their droves
The problem is akin to a chicken and egg scenario for Snapchat’s U.K. team: The more results the team can take to market, the more advertisers will commit with higher spend. It can’t get those results when many advertisers won’t commit to more than one-off campaigns until they see further proof of Snapchat’s impact can ladder up to larger marketing and business objectives of the medium. “There’s skepticism from senior clients who can block Snapchat off a plan out of an irrational feeling. I have tried very hard to get it on plans,” said a paid social media director at a media agency.

Snapchat has turned to its biggest rival for help, hiring former U.K. Facebook agency lead Ed Couchman to be Snap’s U.K. general manager. Since then, changes to its pitch have been minimal, said the ad buyers, with Snapchat execs more concerned with cementing themselves as a clearer route to younger, hard-to-reach demographics online than Facebook and Instagram.

“We’ve seen more direct-response businesses and traditional advertisers like Oreo and McDonald’s come to the platform over the last year,” said Couchman. “If the cost-per-install for an advertiser is lower than the lifetime value of that customer then businesses, particularly the more performance-oriented ones, will keep investing, which is what we’re seeing.”

Part of Snapchat’s problem is it has a leaner team compared to Facebook and Twitter and so its executives can’t educate agencies as frequently as its rivals.

A long-distance learning program, covering a number of tutorials, is currently being pushed to more agency executives to get them up to speed with the nuances of the platform. Furthermore, it has recently hired mobile gaming and e-commerce specialists to attract more direct-response advertisers. More investment like this is needed if more Snapchat is to win more advertisers round. It spent $400 million on sales and marketing through the first nine months of 2018, which is down from $522 million in 2017.

“We’ve tended to do one-to-one sell pitches. Now, we’re looking at scaled versions of those meetings,” said Couchman. “There’s a gap between perception and reality of Snapchat among advertisers. One of our biggest challenges is getting people in the industry to understand the platform because there are some who aren’t on it and so don’t know how it works.”

The other part of Snapchat’s problem is it’s deemed too similar to its biggest rivals. Snapchat might make more headway if it did more to separate its ad business from Facebook and Google and doubled down on the curated brand partnerships around Discover and the augmented reality potential of its lenses, said Jenna Cummings, director of paid media at digital agency VaynerMedia. It’s an ironic observation given for years advertisers in the U.K. pushed the mobile messaging app to mold its ad business to rival the duopoly.

Playing to your strengths
There are signs, however, that things are changing.

Snapchat is pushing buyers to place more ads inside its show, as evidenced by a charm offensive launched this year to create short-form original shows it can sell around the Discover part of the app. With brand safety top of mind for many larger advertisers, the opportunity to book ads in specific shows and channels created by publishing partners is gathering interest, said Sebastian Redenz, head of paid social at Socialyse, part of Havas Group Media.

Elsewhere, advertisers are starting to look at augmented reality differently. Just Eat, for example, runs an AR lens at the end of each month in the run-up to payday, effectively regarding the lens as a staple on its media plans now. It’s not always been possible for advertisers to run ads that frequently because up until last year the only way to buy AR lenses was via an insertion order, which cost £70,000 a day ($92,600). Like, Snap ads Story ads and filters, AR lenses can also be bought programmatically through its self-serve ad-buying tool from last summer for as little as £6($7.94) per CPM.

“If Snapchat’s strengths are the quality of creative and AR then Couchman and his team have to figure out a way to scale that to work closer with more brands and agency creative teams,” said Cummings. “Snapchat needs to give advertisers a reason to take the focus on something other than the slow user growth and the perception it’s just focused on expensive brand partnerships.”

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