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Advertisers spent $90 million, three times what was expected, on Snapchat last year — and it’s a threat to Facebook, says CEO of world's largest ad firm

Big spenders on Snapchat may threaten Facebook
Big spenders on Snapchat may threaten Facebook

Clients of WPP, the world's largest advertising firm, spent $90 million on Snapchat last year, helping the ephemeral messaging app to become a threat to Facebook, chief executive Martin Sorrell told CNBC on Tuesday.

WPP started off 2016 forecasting clients would spend $30 million on advertising on Snapchat, the app owned by Snap Inc. Later in the year, WPP upped its forecast to $60 million and Sorrell said in December that clients were spending $70 million. But the boss of WPP told CNBC that 2016 spending on Snapchat by clients was actually $90 million.

Based on this figure, Sorrell said forecasts about Snapchat's revenue last year are likely to be higher than what the market currently expects. Several media reports note Snapchat's revenue in 2016 was forecast to be $350 million, but Sorrell notes that if WPP clients spent $90 million out of that, it was likely that the social media company's figure would be higher.

Andrew Harrer | Bloomberg | Getty Images

The WPP boss said that Snapchat could become a threat to Facebook in the ad market.

"It does become a threatening alternative to Facebook and I think that's the big opportunity for them. We know Facebook have tried to buy Snapchat a couple of times, we know that they've made product changes as a result of Snapchat's products," Sorrell told CNBC.

"I think Facebook is concerned about the potential opposition."

Sorrell flagged up the ongoing debate over "fake news" as well as advertising measurement issues as opportunities for Snapchat to capitalize one. Internet companies including Facebook and Alphabet-owned Google have been criticized in recent months for not doing enough to combat false articles, particularly around the U.S. election in November. Facebook also admitted finding issues with their ad metrics in December.

"I think with the measurement issues, with the fake news issues, and the fraud issues that the internet faces, clients want to try and experiment," Sorrell told CNBC.

But the WPP head also said that ad spend on Snapchat from clients is still small compared to $5 billion for Google and $1.7 billion for Facebook last year. Market research firm eMarketer expects ad spend on Snapchat to reach $935.46 million in 2017.

Snap is reportedly preparing for an IPO this year that could value the company at $25 billion. The company has 150 million daily active users and has been trying to boost its ad offerings. One of the main ways companies can advertise on Snapchat is via lenses - filters that go over a user's snap. But the company has also introduced adverts in between Snapchat Stories too.

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