uploads///Snap Inc ARPU

How Snap Is Trying to Better Monetize Its App

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Apr. 20 2018, Published 1:28 p.m. ET

Snapchat to roll out direct response ads on the Snapchat camera

Snap’s (SNAP) Snapchat has been selling ads on its filters over the past several years. Now, the social media company wants to sell ads on its camera screen, which users see first when they open the Snapchat app.

Snap will be rolling out direct response ads, which drive users to make an action, such as downloading an app or purchasing, while staying in Snapchat. These ads would mean that users would spend more time engaged in the app, which is what the company would like.

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Snapchat aims to increase per-user revenue

This new feature will likely drive sales for companies such as Adidas, Clairol, and Candy Crush Saga–parent King, which have already used the platform to advertise. Snap is trying to better monetize its platform. Earlier this month, the company started testing an e-commerce feature in which users can use the Discover tab to purchase products by swiping upward.

As the graph above shows, the company’s ARPU (average revenue per user) rose in 4Q17. However, it was significantly lower than Facebook’s (FB) 4Q17 ARPU of $6.18.

Snap stock’s performance has been flat this year despite the company’s stellar 4Q17 numbers. Investors may be still concerned about repercussions of its redesigned app.

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