Snapchat, which recently surpassed Twitter in daily usage, has unveiled an API that allows advertisers to purchase Snapchat ads programmatically and at scale. Part of a broader launch of new ad offerings, Snapchat's Ads API could help the company grow its ad revenue and pave the way for an IPO.
Despite advertiser interest in reaching its massive user base, which is now estimated to be 150 million daily active users, Snapchat advertisers were previously required to purchase ads through a manual process, making it more difficult and time-consuming for advertisers to market their wares to consumers through the popular social app, and potentially putting a dent in Snapchat's revenue. That led many to speculate that it was only a matter of time before the company built an API for ads.
Now, more than a dozen Ads Partners will have access to Snapchat's ad offerings through an API, enabling them to offer automated, programmatic buying through third-party platforms for the first time. As detailed by Adweek's Christopher Heine, "API inventory will be sold via an automated, auction-based system. Snapchat would not disclose much financial detail about the relationships on its API, but Ads Partners members, via their software, will sell video inventory to be automatically invoiced to Snapchat, after which the vendors will collect their fees."
According to Heine, Snapchat is focused on maintaining a quality user experience, so all ads will be reviewed before they go live, even if purchased through an Ads Partner who has integrated with the Snapchat Ads API.
A recently leaked document revealed that Snapchat aims to reach $1 billion in annual revenue by 2018 and the Ads API could be key to that. Without programmatic ad buying enabled by APIs, Snapchat would almost certainly find it difficult to meet advertiser demand. Advertisers, particularly large, sophisticated brands, are increasingly using programmatic ad buying platforms to purchase media, and any company that relies on manual ad buys will be held back no matter how large its audience.
As TechCrunch's Josh Constine notes, "Snapchat is running a playbook quite similar to what Facebook was doing circa 2011, building out an Ads API and platform of adtech developers to unlock more spending on its revamped selection of ad formats" and if Snapchat can achieve Facebook-like results with its Ads API, it could put the company in position to go public in what would certainly be one of the most highly-anticipated tech IPOs in years.