This story was delivered to BI Intelligence "Digital Media Briefing" subscribers. To learn more and subscribe, please click here.
Snapchat’s parent company Snap is in talks with the media-buying arms of several big advertising holding groups — including WPP, Omnicom, Publicis, and Interpublic — with an aim to secure ad-spending commitments of $100-$200 million from each of these firms this year, The Wall Street Journal reports.
Snap’s primary goal is to siphon money away from the lucrative US TV advertising market, which PwC estimated will reach $76 billion this year. These are the steps Snap is taking to accomplish this:
- Facilitating a shift in TV ad dollars. Snap’s advances towards big ad agencies arrives with the announcement of a Snapchat-Nielsen partnership. Advertisers can now buy ads on Snapchat using a similar system as Nielsen’s TV offerings. Making the transition from TV to Snapchat for advertisers as seamless as possible will nudge them into spending on Snapchat.
- Emphasizing Snap's demographics. Imran Khan, Snap's chief strategy officer, pitched Publicis executives and clients last month. He argued that Snapchat merited TV ad dollars by calling attention to the platform's large user base of 18 to 34 year-olds – a demographic that traditional TV is increasingly hard-pressed to reach.
- Tapping into professional networks. A key figure leading Snapchat's pursuit of TV ad dollars is Jeff Lucas, the company's global head of sales, and former ad sales chief at media giant Viacom. Lucas is well-connected to TV ad executives, which should help Snapchat capture some of the $70 billion spent on US TV ads each year.
- Creating a “third force” in the space. Ad agencies are also keen to support Snapchat as a new superpower to counteract Facebook and Google’s influence over digital advertising. Snap is aiming for $1 billion in revenue this year — a small sum compared with the $27 billion and $70 billion that Facebook and Google are respectively expected to rake in this year.
WPP was Snapchat's biggest customer last year, investing $90 million into the platform. According to the Wall Street Journal, rival agencies spent much less than that, with one spending about $30 million. Snap's target of $100 to $200 million from each ad agency would be two to three times more than these companies spent on the platform last year, says the Wall Street Journal.
App developers long considered the "pay once and play" model — in which users pay up front an app and aren't prompted to make in-app purchases — the best way to generate revenue. But as more "free-to-download" apps entered the market, users increasingly opted for these experiences. These apps offer microtransactions for in-app goods and services, and in-app ads.
As the app ecosystem expands further, it will become increasingly challenging for developers to compete in a crowded market. Overall, global gross app revenue will double to reach $102 billion by 2020, according to recent projections by App Annie. As a result, app monetization strategies need to shift at least as quickly as consumer trends and preferences in order for developers to capture a piece of this growing market.
Laurie Beaver, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on app monetization that explores the top app monetization strategies under user- and advertising-paid approaches, and the growing combination of both. We will also look at emerging trends that could help developers navigate the fiercely competitive app ecosystem, and address the potential barriers that developers will have to overcome to reap the benefits of the multi-billion dollar market.
Here are some of the key takeaways:
- The app ecosystem is expanding quickly, and it's becoming increasingly challenging for app developers to compete in a crowded market.
- To capture a piece of the growing market, app developers must adapt their strategies at least as quickly as consumer trends and preferences change.
- Developers can choose a user-paid or an advertising-paid approach to monetizing their apps. Different monetization strategies work best with different apps.
- There are a number of widespread challenges that developers must contend with both before and after they enter the app market.
In full, the report:
- Provides key factors driving the expected growth of global app revenue
- Evaluates the top app monetization strategies
- Looks at emerging trends to help developers navigate the app ecosystem
- Explains the challenges that developers face to compete in the app market
- And much more
Interested in getting the full report? Here are two ways to access it:
- Subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. » START A MEMBERSHIP
- Purchase & download the full report from our research store. » Purchase & Download Now