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In efforts to lure new ad buyers, Snapchat is reportedly offering discounts and bonuses to ad agencies and brands, according to Digiday.
Apparently, Snap has been pushing these discounts and offers aggressively in the past week, and are catered client-to-client.
Here are a few implications:
- After an lackluster earnings debut, Snap needs to impress its shareholders with better revenue growth and increased scale. The timing of the discounts is likely not coincidental — it’s making a strong push in the last month of Q2 to avoid another mediocre earnings report.
- There’s also a discount for advertisers that use Snap’s self-serve tool. Snap wants to encourage advertisers to try out its self-serve platform for ads, since its relatively new. Some ad buyers are skeptical that the self-serve tool is not as robust as Facebook’s, and are willing to take a wait-and-see approach while others test it out, and the discounts can help attract the unconvinced buyers.
- Discounts can get help small and medium-sized businesses on-board. Prior to the launch of the self-serve too, the minimum ad budget for a Snap ad used to be $1,000 per day, according to Digiday. The self-serve platform will not be restricted based on ad budgets, which opens up the door for smaller businesses that could not afford the old minimum, especially with an added incentive via discounts.
- It’s not the first time Snap offered deals to ad buyers. The company also incentivized ad buyers to buy placements through the API. Other tech giants like Facebook, Google and Twitter have all offered discounts to advertisers, especially when rolling out new ad products.
There's no question that consumers are increasing the amount of time they spend consuming digital media, while advertisers are increasing their ad budgets into digital channels. What may come as a surprise, however, is the complexity of the interconnected web of companies involved in the process of delivering digital advertisements to end users. Collectively, these companies are known as “advertising technology,” or “ad tech” for short.
Ad tech companies are intermediaries between advertisers and publishers, and add value to the ad delivery process by consolidating inventory, automating workflows, and offering precise targeting capabilities at scale. The automation of ad buying is also known as “programmatic advertising” — that is, using technology and software to buy digital ads. Programmatic ad spend in the US is quickly ramping up: It will top $20 billion this year and reach $38.5 billion by year-end 2020.
But ad tech's ascendancy isn’t without its drawbacks. The advertising industry in the US is dominated by two main players: Facebook and Google. As a result, ad tech players are fighting for a pretty small piece of revenue pie, one of the many drivers of increased consolidation in the space.
Kevin Gallagher, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on ad tech that examines the different players involved in the process of delivering ads, the formats that are driving growth (notably mobile and video), and the factors that are driving increased consolidation over the coming years.
Here are some key points from the report:
- By 2020, mobile will be the biggest online advertising market, and video the fastest growing.
- So-called "walled gardens" Google and Facebook lead a relatively small group of players that attract the vast majority of digital-ad spending in the US today.
- Growth can be challenging for players outside the walled-garden duopoly, and many companies are reaching a level of maturity that may prompt investors to push for an exit.
- Ad tech is poised for consolidation, and the number of companies in the industry will decline significantly over the next few years.
- Companies specializing in certain ad formats like mobile, video, and TV are attractive targets. They are well positioned to take advantage of the fastest growing segments of digital media.
In full, the report:
- Forecasts US programmatic revenue through 2020.
- Highlights the factors driving consolidation, and identifies new acquirers and attractive targets.
- Explores the challenges ad tech companies face including the dominance of walled gardens, ad blocking and measurement.
- Outlines emerging technologies that will help propel ad growth in the next decade.
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