The changing face of advertising in the rise of social networks

Snapchat’s parent company has finally gone public among great excitement because it has been dubbed to be the biggest U.S. tech IPO (Initial Public Offering) in years. At the end of the first day of trading Snap Inc. was valued at US$ 28 billion turning the twentysomething co-founders into billionaires. In 2013 Facebook’s Mark Zuckerberg offered Evan Spiegel and Bobby Murphy US$ 3 billion for Snap Inc., which they turned down for good reason because each of them now holds a paper fortune in excess of the Zuckerberg’s offer.

Snapchat is one of the fastest growing social media platforms but is yet to reach the numbers that both Facebook and Twitter command globally. Snapchat has 158 million daily users as compared to Facebook’s 1 billion plus — so Snap’s value is in the potential it has to transform its subscriber base into a profitable business model around advertising.

Snapchat is the social network that teenagers love because it started off as a sexting platform and the videos and photos that they post disappear after 24 hours. It doesn’t leave a trail of users activities that parents, teachers and future employers can refer to. Spiegel says that its all about self expression and not about creating a perfect image, differing from what other social networks encourage by storing your comprehensive history of posts.

Spiegel also wants to create a different advertising model which isn’t as intrusive or creepy as the super targeted ads on YouTube and others, preferring to default to a more traditional style where ads are available to a larger audience. This approach means that the ad agencies have to produce more outstanding creative material for brands to generate the kind of engagement that shifts the needle.

Last week YouTube reached a global milestone in video viewing when it reported that people are now watching more that 1 billion hours of video a day on their platform. This has been achieved through embracing artificial intelligence to recommend videos, and has increased the amount of time that people spend on the platform. YouTube’s performance has also been boosted by the fact that the video content added is increasing at an incredible rate; 400 hours of video are uploaded every minute or 65 years of video per day.

The body of content is therefore getting richer and richer by the minute and the machine learning algorithms do a excellent job in recommending material that a user is interested in, and is therefore threatening traditional television which lacks similarly sophisticated tools. YouTube’s video recommendation system had previously rewarded misleading titles and preview images, but the algorithms have since been changed to boost watch time instead. Once this was done the number of clicks dropped by 20% which indicated that people stuck with videos longer.

YouTube is owned by Google, or more accurately by the parent company Alphabet, and the search powerhouse includes videos in search results boosting the propensity for users to land on YouTube videos and improving the platforms fortunes. Alphabet Inc. doesn’t disclose YouTube’s performance, but people familiar with its financials said it took about US$ 4 billion in revenue in 2014.

Snapchat enables subscribers to share user generated videos and they chose to use the mobile-first approach to give them the first-mover advantage over Facebook, making them the darling of younger audiences that are not attached to legacy formats. Facebook has since copied many features on their platform and Instagram, which they own, in an effort to stop users from switching to the newer social network.

Last year Facebook made US$ 27.6 billion in revenue, largely from advertising, which is miles ahead of the US$ 404 million that Snap Inc. achieved, but which points to the potential that Snapchat’s growing user base holds within the larger context of content generation and media consumption.

With new media shifting to video, user generated content and mobile-first systems, it would naturally compel advertisers and their agencies to review their creative and media strategies to meet the demands of today’s audience habits. In the past, when print media came into popularity it added a visual element to advertising and promotions. Similarly radio added sound to capture the imagination of the masses, and TV not only delivered the audio and visual elements together, it also brought motion into the picture.

The invention of each of these mediums delivered new context that required advanced creativity and cutting-edge production techniques to fully take advantage of the opportunities made available. Likewise, the new media provides tremendous opportunities to engage audiences at higher levels.

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