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Coming off the heels of Snap’s Q2 earnings, its second report since going public in early March, it seems as though Wall Street is mainly concerned with one thing: user growth. But that’s the wrong metric to use when determining advertiser adoption, which is the ultimate revenue driver for the company.
To truly gauge the potential of Snap – or any other ad-supported property – investors must consider the key performance indicators that truly matter to marketers.
I’ve worked with a number of the world’s largest advertisers over the last 20 years, and when it comes to media buying, brands are not focused on how fast a particular channel is growing; they’re focused on whether the property has a large enough concentration of a coveted target market and the right advertising formats to engage that market. In this sense, audience size, composition, time spent, engagement, and impact are the primary metrics.
For advertisers, once a channel reaches a certain scale, it’s going to have a pretty stable place on the media plan. At this point, incremental growth is less important to advertisers than the ability to effectively reach the current audience and compel them to action. Just look at linear television – its audience isn’t growing gangbusters, but the eyeballs it does have are highly-engaged and the ad formats are high-impact. That’s why TV still commands 35 percent of all advertising spend – more than $70 billion in the U.S. When…
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