Snap-Back: Agencies Still Upbeat After Q1 Letdown

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Snapchat may have disappointed investors in its first-ever earnings disclosure on Wednesday, but agencies aren't ready to bail just yet.

Snap missed the mark on both user and revenue growth as it continued to fend off relentless copycatting from Facebook and Instagram. But because the platform pulls in the highest engagement rates among millennials, it’s a crucial play for any brand trying to reach that demo, said VaynerMedia CEO Gary Vaynerchuk.

“People don’t realize how strong Snap is under 30 and really under 25,” he said. “If you want someone under 30 to watch a three-minute video, Instagram can’t do that for you. Snapchat can.”

But to grow its audience, Snap will need to engage older demos who haven’t adopted the platform, said Scott Linzer, VP of owned media at iCrossing. Targeting a user over the age of 35 isn’t possible on Snap, he said, which eliminates it from consideration on many media plans.

“We make a very conscious decision to say, ‘Is this something where we’re going to be very laser-focused on from a millennial-under-35 standpoint, or does it not make the business impact cut?’” Linzer said. “It really depends on the goals of the campaign as well as the audience folks are trying to hit.”

Snap’s struggle to connect with older audiences is due partly to the way it markets its product.  But adoption among older demos also has been eroded by Instagram copying its core features, Vaynerchuk said.

“It would be naive to not think that those feature sets [on Instagram] have slowed the momentum of growth of the 35- to 55-year-old demo [on Snap],” he said. “They’ve got to make sure they have a rationale to make 35-55 interesting.”

But Snap remains strong among its core demo, and the audience opportunities are different on both platforms, said Mike Margolin, chief digital officer of independent agency RPA.

“People are loyal to their platforms, particularly when the platforms have their most valuable network of contacts there actively,” he said. “There will likely be a little migration here, a little there, but both [Snapchat and Instagram] appear strong over time.”

Agencies are also eager to see if Snap can improve its measurement capabilities to tie campaigns back to business results.

CEO Evan Spiegel told investors Snap is making a push to engage direct- response advertisers, but Linzer still says the platform is largely a brand play and doesn’t provide enough data marketers can tie back to business results.

“Snap is marking itself for brand value and creating awareness,” he said. “Can they drive leads or sell more widgets or what have you? We have to assess the strength of a Snapchat with respect to making a business impact.”

And unlike a much more mature Facebook, Snapchat ads aren’t yet frictionless to buy, although its self-serve solution, rolled out earlier this month, should help.

“Snap is in development on many of those issues, but it’s not a complete picture as it stands right now,” Linzer said.

While most agree Snap isn’t going anywhere, the willingness of agencies to invest long-term will depend on its ability to add users and demonstrate business impact for brands.

It has one to two years to pull that off, says Vaynerchuck.

“A year from today, if not much has changed, I would say, ‘Uh oh, does this have Tumblr written all over it?’” he said. “But I think it’s way too early to do that.”

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