Snapchat new strategy impresses advertisers, shuns users

Lindsay Bennett
By Lindsay Bennett | 9 August 2018

Snap, the parent company of Snapchat, has announced its first decline in daily active users following a controversial redesign, but is boasting a lift in advertiser interest since it moved to a self-serve model.

Despite its self-serve model enjoying early success and reporting good revenue numbers, analysts still expressed concern that advertisers and users prefer Instagram over Snapchat.

Snap beat Wall Street’s expectations for both revenue and losses. Its share price surged by more than 11% in after-hours trading, partly driven by news of a US$250m (£193m) investment from Saudi prince Alwaleed bin Talal, but ultimately closed down 2% at $12.90.

Prince Alwaleed bin Talal said in a statement Snap had just begun to “scratch the surface of its true potential".

The company has shifted over the last year to primarily sell ads through self-service, automated auctions rather than direct sales.

As a result of the automated system, Snapchat has been able to lower its price significantly since it first launched its Lens ad option in 2016, which is helped it compete with bigger services, like rival Instagram, on price.

Prices fell 9% in the second quarter compared with the previous quarter and 52% from a year ago.

According to reports, two years ago Snapchat was charging US brands $300,000 to $500,000 to sponsor a Lens. AdNews understands it charged a much lower figure to Australian clients, but this year, it's lowered its prices significantly. 

When Snap went public in 2017, shares surged 44% on the first day of trading, but within three months they were back at the $17 IPO price. Last quarter, its stock dropped by as much as 24% after releasing its first-quarter earnings report.

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