When Facebook Inc (FB) reportedly offered $3 billion for Snapchat in 2013, many cried that Mark Zuckerberg had lost his mind. Today, the disappearing-message app sports 100 million daily users and 7 billion daily video views, according to Bloomberg.
During Facebook’s third-quarter earnings call, management said it sees an average of 8 billion video views per day. Meanwhile, Twitter Inc (TWTR) is lagging behind despite acquisitions of video platforms Vine and Periscope.
But Snapchat’s ability to monetize those views leaves much to be desired.
FB stock investors saw the company rake in billions in ad revenue, and TWTR stock investors continue to see strong revenue growth.
Snapchat, meanwhile, lacks basic ad tech that both of those companies provide.
Snapchat’s Engagement Growth Should Worry TWTR Stock
The report of Snapchat reaching 7 billion video views per day comes just two months after reports that it reached 6 billion video views per day. In May, Snapchat reportedly only saw 2 billion video views per day.
For perspective, Facebook’s last update before its third-quarter report pegged its video views at 4 billion per day, back in the first quarter.
That growth speaks to the rising engagement of Snapchat’s users. But FB stock investors can’t complain given the engagement rates for its apps. Facebook claims one out of every five minutes spent on mobile is with either Facebook or Instagram.
TWTR stock investors, on the other hand, have a lot to worry about.
User growth for the company has stalled, and engagement doesn’t appear to be improving. Twitter has tried to incorporate more video into users’ timelines — most recently integrating Periscope video with its flagship product — but engagement levels haven’t been significantly impacted by product changes, according to management.
What’s more, the biggest drive of Snapchat’s engagement, in all likelihood, is Stories — a feature very similar to Twitter’s Moments. As mobile users continue to flock to Snapchat for real-time video updates, TWTR stock investors may feel the pressure.
FB Stock Could Lose Ad Revenue to Snapchat
Not only is Snapchat growing engagement faster than both Twitter and Facebook, it’s finally starting to get serious about advertising. While CEO Evan Spiegel once called targeted advertising “creepy,” the company is coming around to improved ad targeting in order to increase demand and prices for its ads.
Snapchat is working on an applications programming interface (API) to allow ad tech companies to build targeting capabilities and program ad purchases for its platform. Such applications include monitoring what kind of content users are watching in Snapchat’s discover channel (not just which publishers), as well as what websites and content they search for outside of Snapchat.
Additionally, Snapchat is working with analytics firm Moat to provide independent fact-checks to let brands know how many people saw their ads. Furthermore, the company is reportedly working on revamping its Stories section to display more like Facebook’s news feed.
The algorithmically curated feed, expected to roll out next quarter, would provide a familiar setting for advertisers and allow Snapchat to increase its ad load.
All this is to say that Snapchat could find itself taking a large share of the growth in social-media advertising over the next few years, an area both Facebook and Twitter are battling in to continue growing.
As Snapchat ramps up its advertising capabilities, hires more people for its new ad sales team and reshapes its product to appease advertisers, FB stock and TWTR stock investors ought to pay attention.
As of this writing, Adam Levy holds no positions in any of the companies mentioned in this article.
