Snap to test unskippable Ads after struggling to Profit

Snap Inc. (NYSE: SNAP) is redesigning its interface once again after completely separating personal friends’ content and content created by paid advertisers. Now, Snap is looking to add unskippable ads on its platform, according to Digiday.

Recode reported that certain users had access to the new layout of the app. The new design will take user-generated Stories and put them on the Discover page, where they will be with paid advertisers.

The layout will be somewhat similar old user interface where all content was merged onto one page. Although the changes does not mean that all user-generated stories will be on the content page, only some will be.

A Snap spokesperson confirmed that the company will test new content called, Commercials, which will consist of a six-second ads that runs on the Discover page and user-generated stories. Testing for the new redesign will begin May 15, according to the sources.

The company has already been struggling with declining user numbers and unprofitable quarters since going public last year. Snap drives in all of its revenue through advertising, but with unskippable ads, it could potentially drive in more revenue, if the company doesn’t lose its user base.

“They’re aware people will have to get used to it,” said one person familiar with the plans, “That said, so much of the Snapchat generation has gotten accustomed to watching ads to get content.”

Snap received backlash for its user interface changes, which led to a petition to be signed by one million users demanding to revert the application. Snap responded back then saying that the new layout is here to stay, but due to overwhelming pressure, the company redesigned the interface once again.

A study by Fluent in 2017 found that 69 percent of Americans “always” or “often” skip ads on the app, and reaching nearly 80 percent for ages between 18 and 24.

Data compiled by eMarketer reported that Snapchat users spend on average 26 minutes a day as of September 2017, before the company changed the interface. Facebook users spend on average of 41 minutes per day, while Instagram users spend on average 25 minutes per day.

Cowen analyst John Blackledge reported his results of 50 senior ad buyers that 96 percent of the companies would prefer to buy ads on Instagram over Snapchat. The results led Blackledge to downgrade the company to underperform and a price target of $11.

All the statistics together show that Snap is struggling to keep its user retention, which leads advertisers to look into other platforms. The ideal situation for Snap would be to launch initiatives to increase more user engagement, instead of forcing them to watch ads.

Snap announced Snappables on Wednesday, which lets users play augmented reality games by using facial expressions or touching the screen. On Thursday, Snap announced its newest slimmer Spectacles. The wearable camera device will sell for $150, $20 more than the previous model.

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