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Snap acquired Placed, a company that measures the effectiveness of ad campaigns, according to TechCrunch. Different sources place the cost of Snap’s acquisition near the range of $125 million and $200 million.
Placed tracks how effective ad campaigns are in driving consumers to store locations and in making purchases. The acquisition could help Snap bolster its Snap to Store tool, which allows marketers to measure whether ad campaigns run on Snapchat drove users to specific locations being advertised.
The acquisition is important for Snap for several reasons:
- It could help prove the effectiveness of ads run on Snapchat. Placed referred to itself as the leader in location based-attribution in a blog post. This could bode well for Snap, assuming Snap and Placed technologies mesh well, and potentially lead to more precise analytics, such as visitation lift. More precise ad analytics could attract more advertisers to Snap’s platform. Attracting more advertisers is important for Snap, as it still needs to prove itself to as a platform that can compete with incumbents Google and Facebook.
- Increase its ad effectiveness would help Snap earn revenue. This is important after the company missed estimates last quarter in Q1. Snap reported $150 million in revenue for the quarter, compared to analyst expectations of approximately $159 million. Snap needs to increase ARPU, which is dwarfed in comparison to competitors such as Facebook, in order to grow into a big business. For example, Snap’s ARPU for North America was nearly $2, while Facebook's US and Canada ARPU was nearly $17 in Q1 2017.
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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