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Snap Takes Aim at Facebook’s Advertisers

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Advertisers willing to experiment with minnows

Facebook (FB) is attempting to block Snap (SNAP) from recruiting new subscribers from its massive subscriber base. Facebook currently has ~4.0 billion monthly active users, including users on its flagship app and other properties such as WhatsApp and Instagram. 

By rendering distinctive Snapchat features on its native apps, Facebook is working to reduce the need for its users to visit Snapchat to use these features. Can Snap succeed in fishing from Facebook’s advertiser pond?

According to Sir Martin Sorrell, the CEO of advertising firm WPP, marketers are willing to support underdogs like Snap and Verizon’s (VZ) AOL in an effort to challenge the dominance of Facebook and Google in the online advertising market.

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Controlling 60% of the global market

Facebook and Google (GOOGL) are powerful forces in the digital advertising market. According to eMarketer, these two tech giants are expected to control 60% of the worldwide online advertising market in 2017. 

Facebook recently stated that it has 5.0 million active advertisers, up from 4.0 million in September 2016. The chart above shows how Facebook’s active advertiser base has grown since July 2014.

Challenging Facebook and Google

If marketers are willing to support smaller platforms like Snapchat to help break the Facebook–Google duopoly, they could overlook Facebook’s superior ROI[1. return on investment] to spend more with Snap (SNAP), AOL, and Amazon (AMZN).

If that scenario becomes reality, Facebook could see a reduced flow of advertiser dollars to its platforms. It’s unclear whether this scenario could result in some marketers shifting completely to Snap. However, many advertisers are seeking to capture the attention of Snap’s youthful user base.

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