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Despite iOS changes disrupting… everything this year, Snap brought in $1B+ in revenue in Q3 2021 — a first!
James Borow helped the social platform get there. He joined Snap in 2016 to lead development of Snapchat’s self-service ad products, including an ads API.
Back then, Snapchat sold ads through a sales team — but today, they sell ads via digital auction, a transition that has nearly 8Xed quarterly revenue since Q3 2016.
So why doesn’t every app build its own self-serve ad platform? Well, it involves a lot of “thrash,” Borow said — and it’s not for everyone.
CON: You need tons of users to even start.
Otherwise, “you're not going to be able to find pockets of users that are likely to install an application versus ones that are likely... to buy a shoe,” Borow said.
Snapchat had 122M daily active users when Borow joined to lead ad product development — and now it’s at 306M.
CON: Your sales team can’t do manual favors for top advertisers anymore.
To optimize ad pricing and targeting, self-serve adtech needs to process every transaction on your platform, and your salespeople need to pivot into consultative roles.
“You need to commit to saying, ‘I'm going to build an economically rational marketplace,’” Borow said — like the stock market.
CON: Your self-serve ad tool will be dumb at first.
The machine learning algorithms that optimize ad targeting need to learn (hence the name!) from actual transactions and performance. Fresh out of the box, they’re dumb.
If your ad product is good, “within a year [of launch you’ll]… be in a better spot than when you started,” Borow said.
But it takes a year!
PRO: They can get really smart.
Just look at Facebook’s ad algorithm, which is so spooky-precise that plenty of people think Facebook eavesdrops on their private conversations. (Facebook denies it.)
PRO: Long-term, you “own the relationship” with users.
Short-term, iOS changes have been disruptive — but long-term, Borow believes that winners on the privacy-first web will “own the relationship” with users and rent it to advertisers.
In other words, platforms like Snapchat will come out on top, and self-serve adtech “will end up being a good thing,” he predicts.
The future looks bright for social platforms with self-serve ad offerings.
But to get on their level, you have to achieve massive scale, invest major resources, “kill your old business” and then wait at least a year for the payoff. Not for the faint of heart!