Snapchat Flailing Ahead of Possible IPO, Even as Ad Revenue Goes Up

Snapchat is a mega popular photo-sharing app earning a reputation for innovation. The company has been rolling out some unique advertising opportunities in recent months; moreover, it was one of the first social networking apps to experiment with publishing content from news websites like Vox.com directly on its platform.

The company was valued at $16 billion in May 2015, and companies like General Electric, McDonalds, and Nike have advertised on the app. Not only do more than 100 million people use Snapchat every day, but 60% of its audience is between the ages of 13 and 24. In total, its users watch more than six billion videos on the app daily. And with 62% of millennials saying that quality online content drives their loyalty to a brand, Snapchat is uniquely placed to advertise to young people online.

In October, 20th Century Fox became the first company to experiment with a new advertising format on Snapchat. The “sponsored lens” allowed users to make animated selfies of themselves featuring 3D animations of Snoopy and Woodstock from “The Peanuts Movie.” Shortly after that campaign, Sony used Snapchat’s platform to release behind-the-scenes footage from the new James Bond film “Spectre.”

Through unique advertising opportunities like this, Snapchat is hiring new advertising employees and aggressively trying to raise advertising revenue. Yet despite these successes, the company is failing to actually make money.

A leaked financial statement revealed that the company lost more than $128 million in 2014, while earning a revenue of just $3.1 million. Then, Fidelity Investments devalued its own stake in Snapchat by 25% in the third quarter of this year. As the year draws to a close, investors and advertisers alike are getting nervous about the much-hyped app’s ability to actually deliver on its early promise.

Coca Cola’s first campaign on the app has been widely described as a total disaster. Snapchat doesn’t yet have an effective way to target specific demographics among its user base, let alone measure ad performance.

“I’m looking forward to Snapchat coming out with a little more in-depth analytics,” said Syndey Williams, GE’s global social media manager. Even so, Williams added that “the numbers and engagement on the platform are staggering…This isn’t a platform that we can walk away from.”

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