Snapping Up Value

The hottest platform in social media these days is Snapchat. I’ve been a user for quite some time and I’m not sure I completely get how to use it yet. I’m amazed by the stories of those who do even if I’m discouraged that they all seem to be under 15.

As with all things eyeball related, advertisers are flocking to Snapchat because FOMO. Snapchat recently surpassed Twitter in terms of average daily users and even Facebook is feeling the heat as evidenced by their development of a Snapchat-like product. When you’re hot, you’re hot! Of course, heat has nothing to do with the success of a business unless it’s translated into revenue and profit, and so the Snapchat folks are actively selling themselves to marketers.  It’s therein where lies today’s business thought.

Advertisers are complaining about both the pricing and investment level needed to gain access to the Snapchat audiences. This from the Digiday folks:

Snapchat started selling ads in late 2014, and early products — one that went to every user and disappeared within 24 hours — cost about $750,000. In 2015, Snapchat brought down the price for video ads to 2 cents a view, or $20 for 1,000 views. This year, prices were back up with premium animated lenses that could cost millions depending on how many an advertiser bought in a given day, and interactive ads, where users can swipe up for more content, cost about $55 for 1,000 views.

I’ll agree that the level of investment required here is steep, even for big brands.  Other than special events, most unit investments in various media don’t require close to a million dollar outlay.  Obviously, and perhaps by design, the pool of advertisers becomes rather limited as well. Providing an API that will let marketers serve ads through third-party technology companies with a smaller outlay makes sense.  But that’s not the business point.

Where I disagree with Snapchat’s thinking is in dropping the CPM. We can’t ever allow price and value to become confused, whether we’re selling media or anything else. This platform has tremendous value – which I measure by both reach and engagement – and to drop pricing is a mistake. It’s the same thinking we faced in my TV days when trying to sell Super Bowl ads. High CPM? You bet. Tremendous cash outlay? Uh-huh. But the value of that exposure is unlike anything else in media, and in the nearly 20 years since I sold my last Super Bowl ad the value has only gotten higher.

The cost/value equation is one everyone in business needs to learn. Have you?

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