Snap announced Q4 earnings this week, including 10 percent year-over-year revenue growth. Though that was derived from fewer active users, Snap is demonstrating that it’s getting better at monetizing users on an ARPU basis – which was a longtime concern among public-market investors.
But beyond Snap’s financial performance in Q4 (a separate article), one thing that jumped out to us during the analyst call was pointed remarks about SMB advertising. ‘SMB’ or its spelled-out variations was said 11 times (we counted). The headline is that SMB ad growth is accelerating Snap’s top line.
This growth in SMB ad spend mostly occurs around the Promoted Places product. For those unfamiliar, Promoted Places is a local business marketing format that builds on Snap’s increasingly popular social mapping feature, Snap Map. Like Instagram Map, it lets users find each other… and local places to meet.
From the earnings call…
Snap Map has become an increasingly important driver of engagement by helping Snapchatters stay connected to friends, local communities and places in the real world. Snapchatters use the Snap Map to see where friends are spending time, discover what is happening nearby and engage with local businesses and events.
Growth Engine
As for how that maps to SMB advertising, Snap’s revenue growth in Q4 was attributed to a rise in direct-response advertising and “SMB client segment growth.” To quantify that, active advertisers were up 28 percent year-over-year, with SMBs contributing the most ad revenue growth for six consecutive quarters.
For example, our partnership with Triumph Arcade delivered 2.6x more app installs at 37% lower CPI and 94% more purchases at a 15% lower cost per purchase, demonstrating how native formats can drive strong lower funnel outcomes. We are growing our advertiser base by scaling and optimizing go-to-market operations that support the success of small- and medium-sized businesses. SMBs contributed the majority of advertising revenue growth for the sixth consecutive quarter,
Snap pointed to a few efforts driving all that SMB spending growth, including more intuitive self-serve tools (such as Promoted Places), as well as channel partners. The latter includes recent integrations with Wix and others to launch Snap ad campaigns directly from all-in-one SaaS dashboards.
We reduced setup friction by enhancing Ads Manager workflows and expanding integrations across the commerce and measurement ecosystem, enabling advertisers to launch campaigns directly from partner platforms. We also strengthened our SMB offerings through new partnerships, including a global integration with Wix, which allows e-commerce businesses to more easily create campaigns, manage catalogs and improve measurement. In addition, we are investing in AI agents designed to accelerate SMB activation through automated recommendations and onboarding optimizations that reduce decision friction and improved performance.
Social Mode
Stepping back for context, how did we get here, and what are Snap’s SMB marketing efforts to date? As we’ve followed its trajectory over the years, the biggest inflection point was the launch of Snap Map. That was followed by the integration of Promoted Places for SMBs to drive foot traffic in a social context.
From a user perspective, Promoted Places show SMBs prominently in the mapping UX when a user is within proximity, or views the locations of friends that are nearby a business. The idea is that businesses can get in front of users when they’re in a social mode to find nearby friends and get together locally.
This fusion of mapping and social intent has gained steam in recent history, including Instagram’s similar play. The thought is that, though Google Maps has a dominant presence in mapping, it’s missing a social layer to provide navigation and place discovery in the context of social signals and activity.
In fact, this social layer is the biggest thing Google hasn’t been able to replicate, despite several tries over the years (Google+, etc.). Snap Map was born to fill that void. The next step was monetization… which was always a question mark. It was partly answered this week, and we’ll keep watching for more.
