Snapchat founder Evan Spiegel shows how to sell ads without being creepy
Evan Spiegel, the 25-year-old co-founder and CEO of Snapchat, has suddenly become one of the most sought after minds in marketing and advertising, the guru of getting through to the elusive millennial generation. He's one of the headline speakers at next week's massive ad conference in Cannes, France, he's on the cover of Ad Week, and a few weeks before that got major profile treatment in Bloomberg Businessweek.
On several levels, it seems incredibly unlikely that Spiegel is being taken so seriously as a next-generation marketing genius. Sure, Snapchat and its disappearing messages and photos are popular with teens, with probably close to 200 million users. But just a year or two ago the app was mainly seen as a teen cesspool of sexting and dirty pictures. And then there were Spiegel's own emails from college that surfaced last year showing an immature, sexist frat boy-type. Snapchat also had to battle and eventually settle the same kind of lawsuit as Facebook over who really had the idea for the popular service. Finally, Spiegel consistently has been disdainful of the kinds of creepy, intrusive data collection that Madison Avenue loves and that has made Facebook (FB) and Google (GOOGL) so popular with advertisers.
But all that noise obscured what was actually going on with Snapchat. The model appealed to millennials' view of privacy protection: Don't give me weird options or promises about limited sharing or other complex trade-offs. Just don't collect any data on me in the first place. That policy has helped make the app a place where teens give huge amounts of their time and attention, just what advertisers are seeking at a time when traditional TV viewership among this demographic is plunging (and what they do watch often has no ads).
[Get the Latest Market Data and News with the Yahoo Finance App]
And in 2013 Spiegel added video and the ability to create short montages of pictures, comments and videos, dubbed stories. That kept teens in the app even more. And just as importantly, marketers realized that they could turn their creative staff loose to make their own stories, sponsored and brand promoting, of course.
Copying the cable TV model
It turns out there's plenty of historical precedent for the popularity of noncreepy advertising via a site or channel or, in this case an app, that appeals to a large and desirable demographic group.
That's the model that cable networks rode to riches just over a decade ago when they sliced and diced the TV audience by creating literally hundreds of specialty channels. From 1995 to 2008, cable ad revenue jumped from $6 billion to $28 billion, according to a study released by the U.S. Census. That outpaced the growth of every other medium, including print, broadcast TV and radio. Even Internet advertising, which started at zero in 1995, grew to only $11 billion over that period. Craigslist and Amazon may get the blame for destroying print's economic model, but the History Channel, National Geographic channel and MLS Soccer channel should also share in the blame.
Now marketers see a similar dynamic emerging with Snapchat, which is drawing comparisons to MTV and even MTV's multichannel-owning parent, Viacom (VIA). Snapchat is telling advertisers ahead of the Lions International Festival of creativity in Cannes (formerly known as the International Advertising Festival) that its users are watching 2 billion videos a day. And 35 million people between 13 and 34 are on the service daily, as many as watch TV per day in that group.
Spiegel has also been smart about using the data Snapchat does collect. For example, he's been preaching the benefits of shooting video commercials vertically, so they appear properly and full-sized on a smartphone in the orientation that matches the way people naturally hold their phones. Vertical videos get nine times more completed plays than videos shot horizontally, the proper dimensions for old-school TV screens.
And when it came time to find more professional content to entertain his users, Spiegel followed the cable business plan instead of Facebook's strategy. Computer algorithms don't pick stories to show on Snapchat. Rather, Spiegel went with a curated set of videos from a dozen leading media brands, including CNN, National Geographic and Yahoo (YHOO), the parent company of Yahoo Finance. Each channel creates a highly customized program and all are shot vertically (no surprise).
A lot of people laughed at Spiegel when he turned down a reported $3 billion buyout offer from Facebook in 2013. And they mocked the company's more recent private fundraising at a valuation of $15 billion. But with all of Madison Avenue hanging on his every word, Spiegel looks like he'll be the one getting the last laugh.
