As Snap gears up to cash in on AR (again), advertisers stand ready for some clarity
This story was originally published on Modern Retail’s sibling site Digiday.
Snap CEO Evan Spiegel believes that augmented reality could eventually drive ad dollars into his business. But it’s safe to say advertisers aren’t convinced just yet.
It’s not that there’s anything fundamentally wrong with this type of advertising; they just want to see more clarity on what Spiegel actually means.
The only insight they have into Snap’s AR plans came from interviews he gave during his company’s recent partner summit, where he hinted that upcoming investments in AR and a new operating system could bolster the platform’s ads business.
As he told Axios, Snap’s focus on AR and developing its own operating system could help diversify its business model in the future, potentially expanding its advertising opportunities. He added: “I think in the early days, our advertising partners will be thinking about how to extend their core brand experiences through Spectacles.” Spectacles are cordless, compact AR glasses powered by Snap OS.
This has been a long-standing goal for Spiegel; ever since AR became a staple of Snapchat, Spiegel has aimed to extend that potential to advertisers. But, like many flashy innovations, the initial excitement often gives way to reality. The ads were way too expensive at a $500,000 minimum for most brands when they launched, which proved prohibitive for many.
Even the introduction of a cheaper tier allowing advertisers to convert a 10-second ad to AR for $50 didn’t make a significant difference. They still faced hefty costs for creating those ads, which were never cheap to begin with.
For AR to become the advertising goldmine Spiegel envisions, Snap needs to make the technology more accessible to marketers, just as it did for its users.
This is arguably a bigger challenge for the platform, and Spiegel has acknowledged it. Earlier this month, he pointed to Snapchat’s struggle to capture ad dollars from smaller businesses as a key reason why it hasn’t been able to carve out a larger share of the ad market since its launch a decade ago. How, and more importantly if, AR can align with this pivot remains to be seen.
“From an AR perspective, I don’t believe that it aligns with Snapchat’s lower funnel push,” said Lauren Beerling, director of performance media at Collective Measures. “I think those who have leveraged AR technology in the past agree that it can be a great tool for brands, but typically it doesn’t drive those direct response actions as much as awareness or consideration.”
Not all marketers are skeptical, though. Snap has long been recognized as one of the most creative companies in tech, and its messaging app boasts a massive base of 850 million monthly users. If any company can successfully turn AR into a revenue driver, it’s Snapchat. For many marketers, the crucial factor will be how Spiegel and his team integrate AR into their strategies, making it an essential tool for reaching audiences.
“For AR, we see that platforms like TikTok are leaning more into live shopping,” said Jack Johnston, senior innovation and growth director at Tinuiti. “Although Snap doesn’t have a live product today, there is a runway for them to better integrate shopping into these AR experiences to make a more cohesive consumer journey. Automation and efficiency will also be critical for their scale.”
On that point, it would be a mistake to view AR as a cure-all for the advertising challenges facing Snapchat. The platform doesn’t. In fact, its made it pretty clear that it will be a slow burn rather than a blaze – at least when it comes to raking in more ad dollars from a wider set of advertisers.
A spokesperson for the company said in an emailed statement: “While augmented reality represents an important opportunity for our partners, today the vast majority of Snap’s advertising revenue and ad platform improvements go into making our video formats highly performant. In fact, our 13 Year Letter is centered squarely on driving ROI for video advertisers on Snapchat through larger ML models, improving and scaling signals, improving our DR platform and offering performant ad formats.”
If and when Snapchat does launch a more comprehensive suite of ad products for AR on the app then it would need to think long and hard on the impact that could have on the broader experience. Clunky advertising can quickly turn users off, and that’s a risk Snapchat ad execs can’t afford to take.
“Feed ads work because they give the advertiser complete control of creative while injecting it really naturally into the user experience,” said Chris Rigas, vp of media at Markacy. “The equivalent for AR would need to make ads part of the AR experience, but from what we’ve seen right now AR ads tend to be more intrusive or interruptive of the user experience.”
That this is even a possibility now feeds a broader view that Snapchat is going to focus on building more ad products.
Over the past two years, Snapchat has primarily focused on refining the app’s look and feel for users, with the only new ad unit being the Promoted Places for Snap Map teased earlier this month—though no launch details were provided. The same goes for ads in the Chat tab, which were mentioned during the latest earnings update without a timeline for rollout.
Still, these updates, combined with a renewed focus on AR ads, indicate that Snap may be gearing up to allocate more resources to advertising development in the future.