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Why young users pay less
Ad prices jump sharply between 17 and 18 and again between 18 and 21, in the United States and abroad. The rules for tracking, measuring, and targeting users under 17 are extremely constraining, and justifiably so, which makes return on ad spend much harder to drive from teenagers than from 18-year-olds, 21-year-olds, or 24-year-olds. Snap's audience skews young, Gen Z and now Gen Alpha as they graduate from Roblox, so it is less valuable to advertisers than Pinterest, Instagram, or Twitter.
No spot for an ad
Most display ad products open to the screen where the ads go, and studies of attention show where the impressions land. Snap opens to the camera, which makes it the fastest way to capture a moment and send it to friends. Nowhere in that flow is there a logical place for an ad, because the app is built around visual creation and has no feed to fill. Peter Sellis, Snap's first PM, counts camera monetization among his biggest failures, since the teams could never figure it out.
Messaging's ad problem
At its core Snap is also a messaging app, and there aren't really great ad products for messaging apps right now. Even the Asian chat apps people cite look weak on dollars per time spent. Messaging apps are incredible utilities to hold in a portfolio, and Snap needed its utility to become a multibillion-dollar ads business very quickly.
Why is advertising to teenagers so restricted?
In the United States, the Children's Online Privacy Protection Act of 1998 requires parental consent before collecting personal data from children under 13. In the European Union, the General Data Protection Regulation sets 16 as the default age of digital consent, and member states may lower it to as low as 13. The United Kingdom's Age Appropriate Design Code, in force since 2021, adds rules for services likely to be used by under-18s. These laws limit the tracking that targeted advertising depends on.
Why does a feed suit ads better than a camera?
A feed is a stream of items, so an ad can sit between two of them and look like one more item. People scroll slowly enough for each slot to count as an impression. Facebook began placing ads in its News Feed in 2012, and Instagram added ads to its feed in 2013. A camera screen has no sequence of items to slot an ad into.
How do messaging apps earn money?
Tencent's WeChat earns most of its revenue from games, payments, and business services, and added advertising to its Moments feed in 2015. WhatsApp charges businesses for messages sent through its Business Platform. LINE in Japan built a large sticker store. Few messaging apps have reached the scale of a feed-based ads business.
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