Build, buy or rent: Snapchat's biggest challenges building an ad platform

Ask any ad buyer about Snapchat, and they’ll point to two main drawbacks: It can’t easily target ads and then measure how they did.

Snapchat ad campaigns are simply unsophisticated, at this point, compared to what’s the normal course of business on Google and Facebook. That’s why Snapchat is looking to build an ad technology platform that would give brands more targeting options and a better understanding of how their ads perform there.

To get there, Snapchat has to make some strategic decisions, basically centering around how much technology it needs to develop itself versus how much to acquire or rent from partners. All come with drawbacks. Internal development is costly and time-consuming. Acquisition is costly and potentially distracting from other priorities. And partnering with Google or Facebook would be, well, awkward.

“New platforms try to find ways to avoid it because no one wants to be beholden to Google for everything especially when it comes to revenue,” said one tech executive at a top ad agency. “They also don’t want to experience data leakage, but at the same rate, you don’t want to have to build all this stuff.”

All major platforms like Pinterest, Twitter and Facebook have to decide how much they want to let Google into their ecosystems. Facebook built out its ad tech purposefully avoiding Google’s tentacles, not selling inventory or offering services through DoubleClick.

The decision to bring in outside parties into your platform is a strategic one, according to Alok Choudhary, chairman and chief scientist at 4C, a data and media technology company. Twitter, for instance, resisted using Google in its ad platform for years and then last year opened inventory and tracking to DoubleClick.

“It allows you to scale fast; however, then you lose control over the data because you have to expose the data in order to provide advertisers measurement,” Choudhary said.

These are the calculations Snapchat will have to make as it develops the much-needed ad services. Sources have said on top of Google’s ad tracking, Snapchat is talking to Moat for independent verification of video audiences. It’s talking to Datalogix to help connect when Snapchat ads lead to real-world sales. Nielsen and Sizmek are two other names in the talks.

AdAge reported that Snapchat is looking for an ad tech leader, and Recode reported that it’s interested in acquiring an ad tech company.

“In order to become more attractive to ad agencies, they need to drive performance for clients,” said Rory O’Flaherty, senior director of media services at Merkle. “Anything that makes our jobs easier, providing insightful targeting ideas and being able to scale efficiently, is good.”

That’s where an API comes in: An application programming interface lets third parties plug into a publishing platform like Snapchat’s so they can sell inventory to brand clients just like they do for all the other platforms. It gives the advertiser some consistency and some ability to compare results across platforms.

“Publishers need to basically show the value of their inventory,” said Rebecca Kaykas-Wolff, Oracle Cloud’s director of product marketing. “You can get potential value from a demographic perspective, but show me how I’m going to validate that.”

One factor in Snapchat’s favor, however, is the fact that it’s not the first to go down this road.

“There’s an opportunity to learn from the mistakes of other platforms and how they ramped up,” O’Flaherty said.