Instagram is significantly more appealing to advertisers than Snapchat, a study series by RBC Capital Markets and AdAge magazine revealed. In addition to the Facebook-owned social media service, Facebook itself is seen as being a better platform for advertising than Snapchat, the studies suggested. RBC Capital Markets interviewed 1,600 advertisers for its studies, and close to 65 percent of them said they're most interested in marketing their products and services on Instagram, while less than 40 percent of marketers stated they're interested in advertising on Snapchat.
While the Snap-owned social media platform used to boast extremely high user engagement rates, their figures have recently been dropping as they didn't keep up with user additions. Another reason why advertisers are getting increasingly reluctant to advertise on Snapchat has to do with their return on investment (ROI) rates that apparently weren't stellar in the past, the studies suggested. Out of eight platforms that advertisers were asked to rank based on their recorded ROIs, Snapchat ranked at seventh and was only above the Verizon-owned AOL. Google and Facebook took the first two spots on the list.
While Facebook itself still isn't a direct competitor to Snapchat despite introducing a number of Snapchat-inspired features in recent months, Instagram is certainly competing in the same segment and is seemingly taking away its potential clients. This state of affairs is bound to be concerning for Snapchat whose parent company went public earlier this month with the largest IPO in the United States since 2014. Snap doesn't need to look too far to see what can happen when a social media company ends up running a service with poor user engagement rates as that's an issue that has recently been troubling Twitter, another social media firm based in California. Poor engagement rates lead to advertisers leaving, which hurts revenue and profits and consequently makes investors unhappy. Dissatisfied investors are an even bigger issue for a publicly traded company, even though Snap has been offering its stock with unequal voting rights. Finally, the firm's new strategy that's aiming to transform Snap into "a camera company" is another reason why potential investors are reluctant to commit significant resources to acquiring its shares. All things considered, the moves Snap makes this year will likely heavily influence its increasingly uncertain future that may see the company achieve unprecedented success or fail spectacularly.