Facebook is still king in the social media advertising world, but its habit of copying key features of Snap indicates that there could be some threat there. Now it sounds like advertisers are dipping their toe in the water to see how their ads will do on Snap.
Facebook is the clear winner… for now
In a note dated May 22, Needham analyst Laura Martin reported on her recent “fireside chat” with an ad agency executive representing $1.4 billion in social media ad spend across 2,200 different brands in 2016. According to the executive, approximately 85% of the ad dollars his brand clients spent went to Facebook, while 10% went to Twitter and 3% went to Snap. The rest went to Pinterest and LinkedIn.
This year, he looks for social ad spend by his brand clients to increase by approximately 25%, bringing it to $1.8 billion. He expects Facebook and Snap to grow faster than that rate and the other social media platforms to record slower growth. He named Facebook as this year’s obvious winner and interestingly, Snap as “the wild card that most brands want to work with,” according to Martin.
Why Facebook will be difficult to beat
She said the executive highlighted Facebook’s scale as a key reason it will be so difficult to beat. She explained that usually, brands need to spend millions of dollars, and the social network can handle campaigns of any size because of its global scale. Brands with narrow target audiences also find it easy to target a very small, specific niche of people and to do so efficiently.
Additionally, the executive reportedly said that Facebook’s engineers and corporate culture is continually upgrading the return on investment for brands so that it’s always clear to them how their ad dollar investment is performing. One example was using algorithms to put ads in the location that offers the highest return on investment across all of Facebook’s properties, from the desktop site to Instagram and Messengers. The ad agency executive explained that the return on investment through Facebook is higher than it is through Twitter, Snap or any other single platform because single platforms have identical context across them.
Snap is the wild card
Martin said the executive was also positive on Snap, the parent of Snapchat, although he also said it’s just too early to tell. He likes the company’s near-term momentum and told the Needham team that most brands want to advertise on Snap because it “has a laser focus on brands and they work hard to meet brand advertisers’ needs.”
Interestingly, brand advertisers want Snap to be a solid mobile alternative to Facebook, and they’re “intrigued by SNAP’s creativity and innovative ad units.” The executive said most of them are trying the Snapchat parent or boosting their ad spend on it. However, he added that it’s too early to know how big the company will be able to grow, and its small scale is a significant limit currently.
Shares of Snap closed up 0.4% at $20.08 on Monday, while Facebook stock closed up 0.12% at $148.24.