How Snapchat is Meeting Social’s Monetization Challenge

Think Facebook’s big? Well, Snapchat is on the brink of something huge.

By the end of next year, Snapchat is poised to make close to $1 billion in advertising sales and capture over 175 million daily active users. Moreover, Snapchat has more active users than Twitter right now and is the second-most used mobile app, after Facebook.

So, what’s the big deal? Well, Snapchat is eyeing a valuation of over $20 billion. This closely tracks Facebook’s valuation back in its heyday and would put Snapchat in rarified air, alongside Uber and Airbnb. But one hurdle remains. Snapchat has to do something no social platform outside of Facebook has been able to: that it can provide revenue.

CEO Evan Spiegel has undergone an aggressive round of courting advertisers to prove that Snapchat is more than just an ephemeral photo app. Snapchat now charges advertisers an astounding $750,000/day for a video ad. Here’s where the magic happens: a single ad for Taco Bell – to repeat, a single advertisement – was seen 224 million times in 24 hours.

Snapchat’s secret? Its mobile-only interface reaches an audience so difficult to capture with marketers: the ever-elusive “millennial” and the even-more-fabled “Generation Z.” (Yes, I rolled my eyes typing that marketing term for under-18 consumers.) Snapchat’s authentic video ad format has allowed marketers like Taco Bell and Gatorade to thrive and, more importantly, not seem like corporate shills to a skeptical age group.

Snapchat also makes it clear that access to its vast user base is pay-to-play, a strategy that Facebook notably shies away from. For example, Men’s Warehouse notably spent a very large, undisclosed sum to Snapchat to reach 18,000 high schools during prom season. The advertiser saw a 48% engagement rate. 48 percent. Think of the last time anything you did online saw a 48% engagement rate, much less amongst such varied geographic audiences.

And, indeed, other social platforms are noticing. Twitter recently announced that it’s copying Stickers, a feature everyone uses on Snapchat. Facebook is now selling vertical ad units, a unit that was straight up mocked and laughed at before Snapchat made it profitable. Facebook Messenger launched secret chats and filters but has seen very little user adoption. Instagram launched Live Stories, a feature that mimics Snapchat to a tee. Soon, Google will launch Allo, which is literally Snapchat but with Google’s might (and bank account) behind it.

Here’s the problem with all that: these brands are not being authentic. Who signs on to Instagram to post a 24-hour image? Likewise, I surely don’t sign onto Snapchat to take a meticulously filtered picture of my dinner or scenic view. But you don’t see Snapchat copying Instagram.

And that’s why Snapchat’s already won.

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