Snapchat is introducing new advertising options as part of its strategy to enhance its ad business and provide marketers with deeper insights into app usage.

Sponsored Snaps
One of the key updates is the launch of "Sponsored Snaps," which resemble LinkedIn's sponsored InMails. According to Snapchat CEO Evan Spiegel, these ads will appear in users' chat inboxes as new Snaps without triggering a push notification, allowing users to open them at their discretion. This approach aims to engage potential customers throughout the advertising funnel—raising awareness, improving consideration, and driving conversions through in-message calls to action.

Historically, Snapchat’s inbox has been a no-ad zone, but as the platform evolves, it is venturing into this previously untapped territory with paid messaging. Snap assures users that their private conversations will remain confidential and not used for advertising purposes, despite these new placements.

Promoted Places
In addition to Sponsored Snaps, Snapchat is also rolling out "Promoted Places," which will allow businesses to showcase their physical locations on the Snap Map. This feature aims to attract nearby customers and offers tools for measuring customer visits through privacy-compliant methods.

Enhanced Analytics
Alongside these ad options, Snapchat will provide more analytics to help marketers understand how users interact with different app features and how these interactions drive consumer behavior.

Overall, while the reception of ads in private messages may be mixed among users, these new offerings could provide valuable opportunities for advertisers looking to engage Snapchat's active user base.

In the upcoming months, Snapchat plans to provide advertisers with more unique and actionable insights derived from the diverse engagement within the app. These insights will be privacy-safe and will encompass various interactions, including store visits via the Snap Map, engagement with Lenses through the camera, and activity related to public content on Stories and Spotlight. The goal is to create a centralized platform for advertisers to easily utilize these data points in their campaigns.

This initiative aligns with Snap’s broader strategy to cater to small and medium-sized businesses (SMBs) rather than solely focusing on larger brands. According to CEO Evan Spiegel, they’ve discovered that lower-funnel revenue from SMBs tends to be more predictable and stable than upper-funnel revenue. This segment offers significant long-term growth potential, as it is closely tied to key business objectives and often yields positive returns on ad spend. As the scale of SMB engagement increases, it becomes more diversified across various advertisers and sectors, leading to greater predictability.

Snapchat's pivot toward SMBs has already shown promising results, with the number of small and medium-sized advertisers on the platform increasing by 85% year-over-year, a substantial jump. This shift raises questions about why Snap didn’t prioritize SMBs earlier in its development, especially given its past focus on wealthier markets. There was a time when Snap was criticized for appearing to cater primarily to affluent users, leading to a delay in enhancing its Android app, which subsequently impacted its growth in markets like India.

After reevaluating its strategy, Snap realized that while its active user base was growing, revenue was not keeping pace. This revelation prompted the shift back to a broader set of SMBs, moving away from exclusive partnerships with larger brands. 

While this revised focus appears to be yielding better outcomes for Snap, there’s a potential risk that introducing sponsored Snaps into users' inboxes may irritate the core user base and disrupt the app's overall atmosphere. As Snap continues to explore augmented reality (AR) as a future opportunity, striking a balance between ad placements and user experience will be crucial for its ongoing success.