“The company is taking a risk because its first product is the ability to generate the images from its platform,” said Nick Johnson, director of product marketing at Instagram. The company does not know how much money it will make from each photo, just that it is selling them in large quantities to investors “for the right price,” Mr. Johnson said in a phone interview.
Will it be easy for companies like Snapchat to enter the social media market because of its popularity with teens and teenage boys? While Snapchat already has a lot of young girls and teens on its platform, the number of Snapchat users has not grown significantly year-on-year since 2014. Facebook, LinkedIn and Pinterest have also recently tried to appeal to millennials with paid-only services that allow them to upload their photos and then send them to the targeted audiences they want them to reach.
One of the biggest pitfalls for Snapchat, though, may be its ability to generate enough content for its users’ social-media profiles. The company’s most recent growth story came in the form of sponsored content, like the time in December when its main Instagram account received $50,000 in advertising after being “liked” on Instagram by a high school senior. That was a drop in the bucket compared with the billions of dollars that social-media networks like Snapchat make each year. In addition to Instagram, Snapchat has also added news feed video ads to its platform, in the face of competition from Facebook and other rival social networks.
Some marketers worry that Snapchat is trying to replicate Facebook’s social networks by offering branded advertisements that are “in the news” before getting your attention. That is also a concern of some technology analysts, including David Wehner, a director at the New York-based Digital Media & Markets Group.
“It’s a bit of a new approach that’s new to social media that’s not necessarily a good one when you’re buying media,” he said in an interview. Mr. Wehner noted that Facebook and Instagram have long been trying to be more aggressive in getting users excited and then selling them premium digital ads on their platforms — but that it isn’t working.
“They’re going after that premium space and they’re losing all the money they spend up front,” Mr. Wehner said.
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Snapchat does not offer any advertisers a way to pre-emptively target teens based on their location, for instance, but executives have acknowledged that it could be possible in the future. A Snapchat spokesperson said that