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The biggest thing Snap (NYSE: SNAP) CEO Evan Spiegel thinks analysts get wrong about his company is that it's not that much smaller than competitors like Facebook's (NASDAQ: FB) Instagram.
"A lot of people are surprised when they actually look at the data and see the overlap between our audience and the audiences for products built by our competitors," he said at the Morgan Stanley Technology, Media & Telecom Conference. "In our core markets like the United States, or U.K., or France, or something like that, we tend to have roughly the same audience size actually as some products that people perceive to have much larger audiences."
Spiegel says anyone looking at the ad managers on various platforms will see there's not much difference at all. Indeed, an ad targeting U.S. users on Snapchat will reach a maximum audience between 82.7 million and 86.1 million, according to Snapchat's ad manager. Targeting U.S. users on Instagram Stories will reach up to 91 million users, according to Facebook's ad manager. Placing ads in the Instagram feed adds another 29 million users.
Image source: Snap.
The challenge for Snap
Snap's struggles with growing its user base over the last year have been well documented. Despite those struggles, its U.S. audience is still only slightly smaller than its biggest direct competitor's based on data from their respective ad-buying platforms.
But where Instagram is clearly beating Snap is in total advertisers. Facebook says there are now 2 million active advertisers using Instagram Stories. Snap doesn't provide active advertiser data, but it's a sure bet it's far less than 2 million.
Spiegel noted that growing the number of active advertisers on the platform is the best thing the company can do to grow revenue over the next few years. "The No. 1 driver is actually going to be the number of advertisers," Spiegel said.
Snap has started to show some progress in turning its ad pricing around. It's not clear whether those improvements came from better ad products or attracting more advertisers to the ad auction.
Instagram Stories, meanwhile, benefits from a funnel of 7 million Facebook advertisers. Those advertisers are finding it increasingly difficult to generate better returns from feed ads, so they've naturally expanded to ads in Stories. Facebook has helped facilitate that transition by offering tools like automatic ad placement and automatically formatting ads for optimal conversion in Stories.
There's more to the story
Investors and marketers might be operating under a misunderstanding regarding Snap's audience size relative to its competitors, but it's not like marketers haven't heard of Snapchat. And it's not like they're wholly unfamiliar with Snap's product either; Instagram Stories ads are very similar to Snapchat ads.