On the heels of Snapchat's historic tech IPO a few days ago, which was second only to Facebook, comes less promising news for the social and messaging app leader. A survey of 1,600 marketers published by RBC Capital Markets and Ad Age shows that return on ad dollars from Snapchat falls far behind the company's chief rival Instagram. So far behind that even ad revenue from AOL isn't much worse.
Between Twitter, Facebook, LinkedIn, Google, Yahoo, AOL and YouTube, Snapchat only outperformed AOL in terms of ROI, scoring a 3.43 out of a possible 8 points, according to the survey (AOL scored a 2.88). Google (6.98) and Facebook (6.72) led the pack, performing nearly twice as better than Snapchat, RBC said.
Poor targeting, unreliable performance measurement and a decrease in both user engagement and open rates as are a few reason reasons why their advertisers saw their ROI slump with Snapchat.
While those results seen by advertisers are detrimental to Snapchat's revenue growth, the aggressive direct competition from Facebook could be what keeps advertisers from increasing even test ad spends with Snapchat. The recent launch of Messenger Day, seen by some as a SnapChat Stories clone, has already snagged over one billion users for Facebook. Combining that with Instagram's 300 million daily active users, Snapchat has a big challenging in building on its expected 2017 seventy million user market share.
Simply put, if Snapchat doesn't show advertisers some real revenue gains in the next 12-18 months, the company's key revenue driver could slowly start to go, like Snachat pics, poof. The company's projected ad revenue forecast has already been cut by almost 4%.
Snapchat has been a compelling success and its users have fully embraced it's creative, engaging camera sharing tools. There is always going to be a direct push back from competition when you have built a great digital experience. While continuing to be groundbreaking and inventive on the user end, Snapchat will likely do some major revamps on the advertising product end. Expect some big sales and marketing hiring news in the coming weeks from Snapchat.