Snapchat is reportedly moving into ad tech
The ephemeral photo and video messaging platform is in discussions with ad tech companies and advertising agencies about opening up an API (application programming interface,) which would see it significantly ramp up its ad sales business.
One agency executive with "direct knowledge of the plans" told Digiday: "Snapchat's ambition going into 2016 is to have many more opportunities for e-commerce on the platform and other stuff that is more about building audiences."
Business Insider has contacted Snapchat for comment and we will update this article once we hear back. A source close to Snapchat told Business Insider the report was "Not 100% right, but not 100% wrong," but couldn't share more details.
By opening up an API, Snapchat may be looking to work with other technology partners to offer advertisers a self-serve way to buy ads on the platform. Right now, advertisers need to work with Snapchat sales people directly in order to purchase ads. It's time-consuming and limits the amount of advertising Snapchat can feasibly sell.
Partnering with other technology companies could also offer additional benefits such as improved targeting and measurement - two things the marketing community (and investors) have been demanding Snapchat improves if it is to secure a long-term viable advertising business.
There's also the possibility Snapchat's discussions with ad tech companies could see it follow a similar route as Twitter, with its $350 million acquisition of MoPub. Similarly, Snapchat might be looking to use its rich data about its 100 million daily active users to serve targeted ads to users when they are on other third-party apps.
Venturing into ad tech could be a risky, but lucrative, move
Instagram's move to open up its API in August is providing a significant boost to the Facebook-owned photo app's revenue - the results of which will likely be trumpeted during Facebook's Q4 earnings report and call on January 27.
Already, one analyst is predicting Instagram will be the "story of 2016" for Facebook. Meanwhile, media agency MEC Global's head of social media for North America Noah Mallin said client spend on Instagram has increased something like "11,000%" since the app opened its API.
Snapchat's journey to become a major seller of ads has been a rocky one. It sold its first ad campaign in October 2014, but since then has seen a major re-organization within its sales team (including several high profile departures,) has been forced to bring its ad pricing down, and initially marketers described working with Snapchat as a frustrating experience - with demand outweighing supply and some advertisers concerned the app could not supply the kind of targeting, measurement options, and case studies that its partners supply.
However, since then, Snapchat has been on a hiring spree, opened up more targeting and measurement options (although still far fewer than the likes of Facebook, Google, or Twitter,) and has become more proactive in its dialog with agencies and advertisers.
But moving into ad tech is un-chartered territory for Snapchat - a company that has on many occasions derided "creepy" advertising and one that has a young, very engaged user base that it needs to be careful not to turn off with obtrusive ads.
Ciaran O'Kane, founder of ad tech trade publication and research firm ExchangeWire, told Business Insider that tinkering too far with ad tech could see Snapchat run into trouble
He said: "It is fine to be focused on the consumer internet. Building ad tech is a different proposition. Skilled engineers doing this stuff are thin on the ground and making it work requires lots of resource. They have the data, yes. But will they have the stomach of FB and Google to build the type of scaled advertising technology that will power the company's revenue growth? If they do they will have to attract top tier execs who have deep domain knowledge of ad tech - and they are rare."