NEW YORK, United States — On Monday, November 20, a week before the annual Victoria's Secret Fashion Show broadcasts on televisions across the globe, the American lingerie brand's famous Angels will flood the social media airwaves in between tapings from Shanghai, China. Victoria's Secret's splashiest media moment of the year is powerfully amplified through the giant social followings of its many influencer models. (At least, those that were able to secure Chinese visas.)

To that end, Victoria’s Secret has partnered once again with Snapchat, the mobile messaging and media app whose parent company, Snap Inc., went public this March at a valuation of nearly $24 billion. This is the third year that Victoria’s Secret has enlisted Snapchat to produce dedicated Stories, a curated package of images and videos gathered from the accounts of models and participants and supplemented by content created on site by Snapchat’s editorial team. Last year, the Victoria’s Secret Story reached over 12 million unique viewers globally. This year, Snapchat will produce two of these Stories.

VS models Bella Hadid, Jasmine Tookes and Taylor Hill snap from China | Source: Snapchat

"Victoria's Secret looks at it as a way to reach millions of young people," says Ben Schwerin, vice president of partnerships for Snap Inc., who oversees editorial relationships with brands and nurtures relationships with high-profile Snapchat users including Kylie Jenner, Naomi Campbell and Derek Blasberg. "[Stories] are a very compelling way to build a stronger emotional bond between Victoria's Secret, as the producer of the event, and potential fans and customers," he says.

Snapchat now reaches an audience of 178 million daily active users creating an average of over 3.5 billion “snaps” per day, which the company says represents 70 percent of the 13 to 34 year-olds in the US, UK, France and Australia. Users under 25 spend an average of 40 minutes on the app each day.

The majority of Snapchat's revenue comes from advertising, and while it doesn't break down the value of different types of ads and partnerships, Schwerin says Snapchat has created a "nice revenue business" around Stories with Victoria's Secret and other partners from the fashion space including IMG, Off-White, Calvin Klein — totalling 95 Stories so far in 2017, up from 44 in 2016. "[Victoria's Secret] has taken advantage of our full suite of products — advertising and editorial," he says. "Our goal is to double down on what's working… We want to continue to layer on new experiences, new products, more content."

There is certainly is a lot of pressure on Snapchat to double down on advertising right now as it closes out its first fiscal year on the public market, during which Wall Street has voiced its disappointment with the company's performance loud and clear each time it missed its forecasts. The share price decreased 18 percent in the third quarter. Criticism of Snapchat's innovative and (and famously secretive) chief executive Evan Spiegel has also increased from investors who want more information from him than he's willing to give about the company's future.

In the third quarter of its latest fiscal year, Snap's revenue was nearly $208 million (missing analysts estimates by about $30 million) and it added 4.5 million new daily users (analysts were hoping for 8 million). Year-over-year, revenue increased 63 percent and daily users increased 16 percent. Snap also had to take an almost $40 million write down on unsold Spectacles, a wearable released in 2016 that wasn’t the runaway success the company expected, despite a positive reception in the press — especially when compared to Google Glass, the tech giant’s first attempt at eyewear-as-computer.

"We have been wrong about Snap's ability to innovate and improve its ad product this year (improving scalability, targeting, measurability, etc.) and user monetisation as it works to move beyond ‘experimental’ ad budgets into larger branded and direct response ad allocations," wrote analyst Brian Nowak of Morgan Stanley, Snap’s lead initial public offering underwriter, in a note in July. The bank is one of several that has downgraded the stock, citing poor ad completion rates, lower return on investment and increased competition as some of its concerns.

Looming over all of this is Instagram: the giant, Facebook-owned image sharing app has cloned many of Snapchat’s distinctive offerings in the last year. It launched Instagram Stories in August 2016. Just like Snapchat’s Stories, this off-the-cuff sequence of videos and images disappears after 24 hours. Snapchat’s daily active user growth was “relatively flat in the latter part of the quarter” ending September 30, 2016, after growing 7 percent in the previous quarter. In April 2017, Instagram Stories surpassed Snapchat’s daily active users. The following month, Instagram added animated selfie filters that mimicked Snapchat’s greatest differentiator.

“There has never really been a ton of [unpaid] brand Snapchat content; it’s always been more of a place for one-on-one interaction with your audience,” says Raina Penchansky, chief executive officer of Digital Brand Architects, an agency that manages online influencers. “Instagram Stories just became easier and better. Everyone still loves a Snapchat filter, but when you can do the same thing, if not more so, on Instagram — you can get the analytics and you’ve got filters, you’ve got polls [a new Instagram feature that can record audience answers to a question].”

The list of popular content sharing platforms that have been eclipsed by giants such as Facebook and YouTube in the past is long and distinguished: Myspace, Google+, Vine. Some wonder if Snapchat could be next. Others say the negative press is overblown.

The competition has forced Snapchat to lean into some of its biggest strengths and really define what makes them unique.

“I think the competition between the two has been really healthy,” says Mike Dossett, vice president and associate director of digital strategy at RPA, an independent Los Angeles advertising agency. “It has forced Snapchat to lean into some of its biggest strengths and really define what makes them unique.”

From Snap's perspective, its most important differentiator is an emphasis on user content creation, underscored by the fact that the app opens to the camera instead of a news feed. (Snap Inc., after all, calls itself a camera company.) It also has a young, loyal and coveted audience that is otherwise hard to reach, and a buzzy reputation for understanding how to feel relevant to that audience: 21 percent of users are 13 to 17 years old; 36 percent are 18 to 24; 27 percent are 25 to 34; and 16 percent are 35 and older. In the more recent quarter, daily average snaps increased by half a billion.

The emphasis on one-to-one interactions is another selling point. While Instagram is about showcasing your life to a group, large or small, Snapchat says it’s about intimate conversations. “The majority of time spent on Snapchat is interacting with your closest friends,” says Schwerin. “So when our users choose to interact with their favourite models, for example, they're really engaged in it and they're really invested in the content.” When it comes to fashion, where the audience is eager to see behind the polished, iconic images the industry produces, Snapchat says its up close and personal nature makes it the best platform for that access.

Snapchat has been working swiftly to prove this unique value to its advertisers over the last year and a half. In an effort led by chief strategy officer and former Credit Suisse banker, Imran Khan, it is building a targeting-and-measurement infrastructure that gives brands much more insight into who their ads reach and how they are received, a lot closer to that of its Silicon Valley rivals. As the world's biggest sellers of online advertising, Google and Facebook have troves of data they use to connect brands with very specific audiences and track the results. Instagram has the advantage of being able to plug directly into Facebook’s highly-advanced advertising infrastructure, which identifies audiences by everything from interests to professional background.

“[Snapchat’s] measurement infrastructure has always been the Achilles' heel,” says Dossett. However, he adds that Snap has pinpointed those limitations, making significant investments to address them.

Snap has since formed 18 third-party measurement partnerships that focus on verification (knowing that an ad was served), viewability, reach, resonance and reaction. It has also built out a self-serve infrastructure for high volumes of programmatic ads which is more accessible to small and medium-sized businesses. Last quarter it introduced Snap Pixel, a custom conversion tracking tool.

“They are now benefiting from two-plus years of conversations with brands who are telling them exactly what they need to prove the value [of their offerings],” says Dossett. Advertising on Snapchat includes custom augmented reality lenses, branded filters and full-screen ads that can swipe up to reveal videos, games, e-commerce landing pages or app downloads. Ads can appear within Stories posted by friends, curated by Snapchat, or produced publishers such as Vogue and the New York Times in a magazine-esque format.

How effectively brands can assess the value of investing on Snapchat is key to combating another challenge: right now, many brands only allocate limited “experimental” ad budgets to the app. Dossett says the app has started to develop a baseline of effective performance and benchmarks within different categories and formats. “Snapchat is definitely maturing out of that space,” he says. “They’re certainly not at the ‘must buy’ guarantee level, something like a Facebook and Instagram and Google are, but they're approaching that, which is helpful."

Expanding the world of Snapchat’s augmented-reality lenses, which are much more evolved than that of its competitors, will also be key to Snapchat’s maturation. Brands are eager to create something interactive for users but can’t always spend a reported $300,000 to $750,000 per day on a fully customised lens. It recently released a new suite of AR lenses designed for outward facing cameras, which render interactive objects in space, and could have implications for shopping experiences.

For brands, it's a really powerful tool to have a creative execution that people are not just going to passively watch — they're actively sharing it.

“For brands, it's a really powerful tool to have a creative execution that people are not just going to passively watch — they're actively sharing it with people who are closest to them,” says Schwerin.

“They are potentially really rich creative canvases where people have the opportunity to actually drive much more explicit connection between themselves and the brand,” adds Dossett. “It basically makes co-conspirators, if you will, in brand advertising.”

In the most recent earnings call, Spiegel said the company is working to “democratise lens creation” so that anyone anywhere can make one. “Augmented reality is one of the many ways that we inspire our community to create Snaps,” he said. And if users create more, they engage more and spend more time on the app.

GQ's Publisher Story (left) and Refinery29's (right) | Source: Snapchat

For advertisers worried about controlling adjacencies — including past luxury advertisers Burberry and Chanel — Snapchat has the Discover platform, which features original video series and where publishers such as Hearst and The Daily Mail publish Stories. "If you're an advertiser, you're trying to develop that next generation of consumer and that's increasingly hard to do on TV or in print," says Schwerin. "We have this really great highly produced glossy curated content with our Publishers Stories that, frankly, really no one else has." In the second quarter, publisher story views increased 30 percent quarter-over-quarter.

“Snap serves a reader who we would like, in many instances, to introduce to our brand,” says Kate Lewis, senior vice president and editorial director of Hearst Magazines Digital Media. The company takes a share of the advertising revenue generated by its seven brands on the platform, two of which are daily: Cosmopolitan and Sweet, a brand it launched specifically for Snapchat in 2015, which debuted when Snapchat launched the publisher platform. Hearst helps sell ads against the Stories and produces all the content itself (dedicated animators and designers sit within each digital brand team). But Lewis says the company doesn’t spend significantly more resources on Snapchat than it does on Instagram content.

As more brands have come onto Discover in the last two years, the competition for attention has increased. “We have to really be focused on presentation, both the language and the aesthetic of these brands,” says Lewis. “It has made us more rigorous in terms of scraping data, but also in terms of elevating our style.” Harper’s Bazaar, for example, presents aspirational fashion content with an eye to the fact that the average audience of 10 million unique users is likely too young to buy luxury products.

Sweet, which reaches about 20 million unique visitors per month, has also had to evolve to survive. (There has reportedly been a rapid turnover of staff since launch in January 2015, and its editor-in-chief was laid off in July.) “Sweet continues to be, in mission, what we set out, but perhaps has changed a bit in execution,” says Lewis, describing it as a brand around shopping and culture for an edgier audience that has become more light-hearted and more about people instead of objects. “In general, offering something novel to the internet is hard,” she says. “So it was hard when we launched Sweet and it’s hard in general. The kind of stuff that performs well is the stuff people already know they want to know.”

From AR innovation to expanded behind-the-scenes access to events like the Victoria’s Secret Fashion Show, all of Snapchat’s efforts to beef up its offerings will be fruitless if new users continue to slow down. In the most recent earnings call, Spiegel outlined several ways the company will work to bring more people onto the app next year. It will build “more distribution and monetisation opportunities” for influencers and help them reach larger audiences. And, most importantly, it will redesign the app in response to feedback that it is “difficult to understand or hard to use,” as Spiegel described it, adding that will have some elements of the content feed, which could make it easier for brands and influencers to reach new users organically. It could also encourage older audiences to sign up, too.

“There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term, and we don’t yet know how the behaviour of our community will change when they begin to use our updated application,” continued Spiegel. It won’t be Snapchat’s first risky gamble or, likely, its last.

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