A lot is riding on Snapchat’s building up its ad business. The company, which Mr. Spiegel helped found in 2011 and is now based in the Venice Beach neighborhood of Los Angeles, needs to justify a valuation of about $19 billion that its investors have placed on it. The company also faces sky-high revenue expectations; the investment bank Jefferies recently projected that Snapchat’s revenue would grow to $1 billion next year from more than $350 million this year.
In an interview, Imran Khan, Snapchat’s chief strategy officer, said the company’s ad formats gave brands “a creative platform” that made ads a “natural experience.” Snapchat declined to comment on its revenue.
While Snapchat’s best-known figure, aside from its ghostly logo, is the youthful Mr. Spiegel — who in the last year has been photographed for the Italian magazine L’Uomo Vogue as well as frolicking with his supermodel fiancée at beaches — it is Mr. Khan, a former investment banker, who has been overseeing the company’s advertising efforts. Mr. Khan joined Snapchat in late 2014.
At the time, Snapchat had just run its first ad, a short trailer for the teenage horror movie “Ouija.” Advertisers say those early video ad campaigns cost as much as the most expensive ads on YouTube, which run in the hundreds of thousands of dollars.
“At that price, it was too hard to test the waters and learn in a new environment,” said Ms. Hofstetter of 360i.
Mr. Khan set about trying to respond to concerns while building out an ad team. He recently recruited Viacom’s advertising sales chief, Jeff Lucas, to be his new vice president for ad sales. He opened new ad sales offices in cities such as London and Sydney, Australia, to provide more support to those making ads for Snapchat.
Snapchat also began introducing less expensive ad products, some of which start at just $5. This summer, the company let third parties sell ad space on Snapchat, which makes it easier to get more ads onto the app.
Mr. Khan’s biggest job was to explain why Snapchat’s unusual platform was better for advertisers. The task was thorny because Snapchat is a messaging, sharing and broadcast service where most content disappears. Companies had few comparable apps to judge Snapchat against.
The potential became clearer after brands started experimenting with Snapchat’s geofilters, a tool that adds custom stickers, a type of colorful icon, to the app when people enter a certain geographic area, and lenses, which are whimsical images that transform someone’s face in the app.
At this year’s Super Bowl, for instance, Gatorade bought a Snapchat lens that let people pour a virtual cooler of the sports drink on themselves in the app. That lens was viewed about 165 million times in a single day. In contrast, the most-watched ad on YouTube last year, “Clash of Clans: Revenge,” was seen 82 million times, according to AdWeek.
Brands that “had become too focused on metrics” suddenly saw in Snapchat a “playful way to deepen customer loyalty and affinity,” said Constance DeCherney, director of strategy at the ad agency TDA Boulder.
In May, for Cinco de Mayo, the fast-food chain Taco Bell designed a Snapchat lens that allowed people to turn their heads into a taco in the app, with the chain’s logo sitting prominently on the screen. Such holiday-related lens ads reportedly cost as much as $750,000. The ad received about 224 million views in one day — and is the most-viewed ad ever on Snapchat.
“It was all taco, taco, taco,” said Ryan Rimsnider, senior manager of Taco Bell’s social media team. “It was a little surreal.”
Taco Bell, a major advertiser, was an early supporter of using Snapchat as a branding tool. Snapchat executives recently attended Taco Bell’s three-year “Snapiversary,” which included a custom geofilter for the event. Taco Bell later sent a taco truck to Snapchat’s headquarters.
Since those early ad experiments, other brands have started campaigns on the messaging service. Last week, Tiffany & Company began its first Snapchat campaign with a lens of the Tiffany logo and flying hearts in Tiffany blue that people could use to decorate their selfies and videos.
Snapchat said millions of consumers in the United States, Australia and Italy played with the lens for about the same amount of time as it takes to watch a normal video ad. They then shared their pictures and videos, spreading Tiffany’s brand. The lens is now gone, replaced by a geofilter that adds Tiffany-branded stickers to photos when you enter a Tiffany store.
“Consumers want something more than a passive experience,” said Diana Hong-Elsey, Tiffany’s vice president for global digital marketing. “When you know content will disappear, you want to interact with it in that moment.”
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