Brief:

• Snap, the parent company of image-messaging app Snapchat, is offering free ad credits to advertisers that buy vertical video ads on Instagram and other rival services, per a report from Recode. Snap is urging advertisers to fill out an online application that asks them to upload proof, such as an invoice, that they bought ads on a Snapchat competitor in past three months.

• To be eligible, an advertiser also needs to be new to Snapchat, which doesn’t have any minimum spending requirements or other conditions attached to how advertisers spend the ad credits. The credits must be applied to Snap Ads, and will be valued in the range of several hundred dollars, per Marketing Land.

• More than 90% of Snap Ads were bought programmatically during Q4 2017 as the company transitioned sales to automated auctions, per Snap’s prepared remarks to investors. Its effective price per impression fell 25% while total ad revenue grew 38% from the prior quarter.

Insight:

Free ads credits are the example of how Snap is trying to attract a wider array of advertisers and consumers to take advantage of its unique offerings as it competes against much bigger companies like Facebook. Snapchat was the first app to popularize the vertical video format intended specifically for mobile devices, and the format has been adopted by publishers and rivals like Facebook, Instagram, Pinterest and YouTube. While that adoption has made Snapchat less unique than competitors, it also means that advertisers have one less barrier to migrating their vertical ads from other platforms.

Snap clearly wants to target advertisers who may be more familiar with more established social media apps like Facebook and Instagram that have copied Snapchat’s more popular features, such as Stories that string together multiple images into a single post. By offering free ad space to advertisers, Snapchat is giving them a chance to try out its platform and become more familiar with the app’s ability to target audiences, especially younger millennials and teens that make up a significant portion of its users.

Snap is reaching beyond advertisers with the biggest budgets. More than 50% of Snap's revenue in the December quarter came from advertisers who were outside the Ad Age Top 100, per CNBC. The company has an opportunity to capture more business from rivals like Facebook, whose ad prices climbed 43% in Q4 2017 from the prior year while the number of ad impressions rose only 4%. Snap also has made efforts to demonstrate its effectiveness compared with other platforms, including a program to let third-party measurement firms track how ad placements affect sales for a brand, according to Marketing Land.