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Snap's (SNAP) New Dynamic Ads Target E-commerce Advertisers

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Snap Inc. SNAP recently announced its new advertising solution, Dynamic Ads, to attract ad dollars from retail, e-commerce and other direct-to-consumer (DTC) brands.

Dynamic ad platforms enable automated personalization by picking items from advertisers’ product catalogues and targeting them automatically at audiences with relevant interests and recent search patterns on websites.

Additionally, the platform also benefits advertisers by removing their need to advertise each product manually and individually.

Snap’s Dynamic Ad solutions include in-built templates to create variations of different mobile ads at scale without the use of manual designing skills. Advertisers’ preference of template selection will guide Snap's systems to build relevant ads in vertical view format for Snapchat users.

Moreover, advertisers can sync a product catalogue and select audience for prospecting or re-engagement, enabling Snap’s system to deliver ads in real-time.

Further, the company offers features like the “always-on” campaign mode that adopts product changes like prices, availability etc. and makes ad adjustments to continuously cater to preferences and interests of shoppers on Snapchat.

Snap’s Dynamic Ads beta will begin in the coming weeks for advertisers initially open to Snapchat users in the United States only. Support for additional regions is planned in the coming months.

Snap Inc. Price and Consensus

Competition in Dynamic Ads

Snap faces competition from similar dynamic ad options available on Facebook FB, Alphabet’s GOOGL Google, Amazon AMZN, Instagram and Pinterest. Such platforms also enable businesses to upload product catalogues in order to accelerate promotion efforts.

However, Snap's offering stands out as it comes with an array of creative templates to better showcase advertisers’ content as opposed to its competitors who add it to a generic listing.

Per a company report, brands like Princess Polly and the U.S. Vitality showed promising results from Dynamic Ads testing done in third quarter. The results reflect 66% decrease in cost per purchase and a 286% increase in return-on-advertising-spend in campaigns run by various advertisers.

Additionally, Snap is benefiting from growing saturation in various digital advertisement platforms and higher ads pricing witnessed by its competitors. DTC brands are shifting business to Snapchat for cheaper coverage.

Per a Business Insider Report, Snapchat Story Ad cost per 1,000 ad impressions (CPM) run at low rates of $2 compared with CPM rates of $10-$16 charged to advertisers for Instagram ads.

Moreover, Snap is increasingly adding features to make the app more shopping friendly, engaging and effective for marketers and users. Marketers are increasingly spending on promotional advertisements.

Notably, global digital ad spending is expected to grow to 517 billion by the end of 2023, per Statista report, which bodes well for Snap.

Moreover, Snap recently launched the first shopping-enabled game from Adidas on Snapchat. The company also inked partnership with Spotify to launch in-app stores from select accounts like Kylie Jenner’s Kylie Cosmetics, Kim Kardashian’s KKW Beauty and Spencer Pratt (Pratt Daddy Crystals) to enhance Snapchat users’ shopping experience and brands visibility.

These factors are expected to drive user base. Notably, Daily Active Users (DAUs) at the end of second-quarter 2019 were 203 million, up 13 million sequentially. Additionally, impressions per DAU were up 122% from the year-ago quarter, driven by growth in user engagement.

Per a company report, more than 75% of the U.S. population between 13 to 34 years age is active on Snapchat, and daily Snapchat users open the app over 20 times each day.

However, Google’s 32% and Facebook’s 21% revenue share in the global digital ad market is a distant goal for Snap, which accounts for 0.5%, per an eMarketer report quoted by Reuters.

Zacks Rank

Snap currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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