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What’s Snap Getting from the Shopify Deal?

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Exposure to over 800,000 potential advertisers

Snap (SNAP) and Shopify (SHOP) recently struck a digital marketing deal, which could be a major boon for Snap’s advertising business. The partnership involves Shopify rolling out tools that will allow its merchants to purchase and run advertisements on Snap’s Snapchat platform. For Shopify, this arrangement will increase exposure for its merchants so they can reach more potential shoppers. Snapchat has more than 190 million users around the world, including 80 million in North America.

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For Snap, the arrangement with Shopify means exposure to hundreds of thousands of potential advertisers. More than 800,000 small businesses operate stores on Shopify. The partnership with Shopify simplifies the process for these businesses running commercials on Snapchat, a social app popular among young people. According to eMarketer data, Snapchat is the top social app for US teens aged 12–17, making it a coveted advertising platform for brands and businesses seeking to connect with young consumers.

Snap keen to grow its advertising business amid hardware weakness

Snap generated $320 million in revenue in the first quarter, compared to revenue of $787 million generated by Twitter (TWTR) and $236 million revenue generated by Yelp (YELP). Facebook (FB) generated revenue of $15.1 billion in the first quarter.

Snap no longer breaks out revenue from its Spectacles sunglasses business, a sign that the business may be struggling with weak demand, leaving Snap more dependent on advertising dollars. As its hardware push has seemingly stalled, Snap is ramping up efforts to grow its core advertising business.

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