CEO Evan Spiegel announced that Snapchat is testing advertisements on Spotlight, its TikTok competitor, during the company’s quarterly earnings call yesterday. While Spiegel cautioned that this testing is limited, it does confirm that short-form video is one of the ways the company is attempting to increase income. Snapchat also debuted mid-roll adverts in select creators’ stories in December, giving the artists a revenue cut from the commercials.
On the earnings conference, Spiegel stated, “We’ve really [seen] a very fascinating type of phenomena take hold on Snapchat where artists are leveraging Spotlight and submitting videos to Spotlight to attempt to garner more exposure and attract more subscribers to their narrative.” “I believe this will be another wonderful method for us to help artists and continue to enhance the Snapchat content experience.” Last year, Snapchat handed out $250 million to 12,000 creators through Spotlight. Ad revenue sharing is an obvious next step for Snap to boost income and creative rewards, but determining who gets a piece of the ad money in the TikTok-style video stream format is difficult.
Ads are presented between short videos on TikTok, where there is no ad revenue sharing, therefore how would you know who receives the revenue split if the ad isn’t playing immediately on the video as on YouTube? Who made the video that appeared before or after the advertisement? Because of the nature of the short-form video stream, giving creators a percentage of ad money is difficult, which means the artist gets the short end of the stick.
Snapchat explored ad revenue share on stories initially, which makes sense. If a creator uploads many videos to a single story, you know you can put an ad in the middle of them, and it’s obvious that the videos before and after the ad belong to the same author, so they’ll get the income split. Ads might be placed immediately in the middle of a single short-form video on Snapchat or TikTok, but it would be a terrible user experience – image attempting to watch a 15-second video and being offered another 10-second ad seven seconds in. Gross. It’s understandable why TikTok hasn’t attempted it yet.
No one likes to watch more advertisements, but if platforms like TikTok, Snapchat Spotlight, and Instagram Reels can’t come up with a way to give creators a bigger piece of the pie outside of a creator fund, they may turn to the YouTube partner program, which gives a 55 percent share of ad income. Still, adverts on Spotlight make sense as a source of revenue for the organization.
Despite the fact that Snapchat’s revenue climbed 38% year over year to $1.06 billion this quarter, the firm fell short of its revenue targets, which CFO Derek Andersen addressed by claiming that many advertisers temporarily suspended their campaigns when Russia invaded Ukraine. Even if Snapchat is expanding faster than competitors like Twitter and Facebook, which last quarter experienced their first-ever daily active user drop, the firm still has potential to grow in terms of ad income.
