Snap Inc. (SNAP), the maker of the disappearing-message app Snapchat, is having a rough time courting advertisers, which has been weighing on its shares. With the stock closing at its IPO price of $17 Thursday and only up slightly in trading Friday, it raises the question of why is it having trouble finding advertisers?  Rival Facebook Inc. (FB) has no problem raking in the revenue from advertisers.

Consider this: According to a recent survey of marketers by Social Media Examiner and chartered for Business Insider by Statista, only 7% used Snapchat in the first quarter of this year. Facebook was used by 94%. Twitter Inc. (TWTR) and Pinterest were also able to surpass Snap when it came to luring advertisers during the first three months of the year. (See more: Google and Facebook Run 57% of All Digital Advertising Worldwide)


One of the reasons for the lack of ads on a hugely popular social network for young people is the simple fact that advertisers don’t use it themselves and thus don’t understand it. Ad executives and marketing professionals use Facebook to share photos of their kids and therefore understand how it works and how to promote brands on it.

Taco Time

Critics argue that Snap hasn’t done that great of a job educating brands on how to use the platform to boost sales. That’s not to say everyone is clueless when it comes to the messaging service. Earlier this month Dunkin' Donuts used Snapchat to promote its National Donut Day celebration, enabling users to turn themselves into a donut. The unit of Dunkin' Brands Group (DNKN​​) also rolled out a National Donut Day Snapchat Geofilter that way available for the day in and around its stores nationwide. Yum! Brands (YUM) unit Taco Bell launched a lens -- real-time special effects and sounds -- that allowed users to turn into a huge taco back on Cinco de Mayo (May 5) and drove 224 million views.

In an interview with Adweek at the time, Ryan Rimsnider, senior manager of social strategy for Taco Bell, said it worked with Snapchat for six weeks to develop the lens. The format reportedly costs $750,000 for holidays or large events, noted the report. The average time spent with the ad was 24 seconds and the effort generated 12.5 years of play in one day, Snap said. The taco lens now holds the title as the most viewed lens. (See also: Snap Results Bring Out Twitter Comparisons on Wall Street.)

Desperate Discounts?

Snap is also pulling out the stops to boost ad revenue in the current second quarter and is reportedly offering discounts to meet that end. Citing multiple ad agency executives, Digiday reported it is giving marketers bonuses, discounts and media credits for any ad buys that are slated for the second quarter of this year. The value and type of breaks advertisers get vary, noted the report. One media buyer told Digiday that Snap will give new application programming interface (API) partners a 10% discount in the form of a bonus coupon. Another buyer said it was getting a 10% discount for API buys that are completed via Snapchat.

Earlier this week, the company rolled out its previously announced self-serve Ad Manager that enables customers to purchase, manage and view analytics on ad campaigns they run on the messaging app. Snap is even letting customers use a credit card in the U.S. to pay for their ads in an effort to boost revenue generated from that.


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