Snapchat's popularity with younger users has helped it eat into an important segment of Facebook's audience. Now Snapchat is stepping up its attack on another major pillar of Facebook's business: advertisers.
Snapchat is rolling out two new tools to bolster its ad offerings, one of which is aimed squarely at a key source of Facebook's mobile ad revenue.
Advertisers on Snapchat will now have access to goal-based bidding for app install ads, an industry term that means an advertiser can target Snapchat users who are likely to install its app. Snapchat is targeting its app install ads, which ask users to swipe up on full-screen video ads, using machine-learning technology it developed in-house.
"We've been listening closely to direct-response advertisers and are excited to announce the ability to 'bid for installs' in our auction," Peter Sellis, the director of monetization product at Snapchat's parent company, Snap Inc., told Business Insider in a statement. "This is a new, cost-efficient way to drive app installs right from Snapchat."
The market for app install ads is growing quickly, with revenue in the US expected to reach over $7 billion by the end of 2020, according to BI Intelligence. App install ads are also a core revenue driver for one of Snapchat's main competitors, Facebook. (App install ads accounted for 17% of Facebook's total ad revenue in 2015.)
"App discovery is heavily influenced by social platforms, and Snap needs to be playing a large role in that space," Gametime's vice president of growth, John Hession, told Business Insider via email. Gametime was an early beta tester of Snapchat's goal-based bidding system for app install ads.
Hession said that Gametime's results from its targeted app install ads on Snapchat "were comparable to other large platforms" but that Snapchat's cost-per-install rates were impressive compared with competitors "running a lot more impressions and ad dollars."
Aside from app install ads, Snapchat is also beefing up its ad targeting. For the first time, advertisers can target Snapchat users who have previously interacted with other ads they've previously ran in the app.
For example, if an advertiser buys one of Snapchat's more expensive selfie filters (which the company calls Lenses) for a national campaign, now the buyer can later target those same users again with one of Snapchat's full-screen video ads.
Creating smarter and more granular targeting abilities for advertisers will be essential for Snapchat to grow its fledgling ad business, which brought in $404 million in revenue last year.
Snapchat now works with 15 outside partners that help sell its inventory, and in January it struck a deal with Oracle Data Cloud to show ads based on what its users buy in the real world.
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