Advertising once meant billboards. Then radio and TV followed newspapers in pushing messages into the home. Smartphones put ads in your pocket — and now sis plastering brands on your face.
Snapchatters have so far been able to turn their head into a giant taco with the Taco Bell's Snapchat "lens" filter, add a fluffy white goatee and a red top hat to impersonate Uncle Sam in a Budweiser lens for July 4, as well as freak out friends with an X-Men look. Users are tempted to engage with a brand's lens, sending selfies to friends with marketing messages overlaid.
This is one revenue stream that Snap, the owner of Snapchat, is touting as it sets out on its roadshow this week, hoping to convince investors it should have a market capitalisation of up to $18.5bn.
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Despite being lower than some people close to the company had originally hoped, this capitalisation would still make Snap one of the largest US technology initial public offerings in recent years.
One key risk factor it admits is increased competition that could erode such revenue streams.
Marketers believe it will have to innovate incessantly to see off a threat from Instagram stories.
Snapchat are in creative hustle mode. When we meet with them, they are so excited about the possibilities building to IPO.Kelly Schoeffeldirector of brand innovation at ad agency 72andSunny
The Facebook-owned app copied the "stories" feature — photos and videos that live for 24 hours — from Snapchat and opened itself up to video adverts last month. It is now trialling "stories" inside the main Facebook app, which could turn up the pressure on Snap even further (see chart here).
Creative advertisers enjoy working with Snap because the company is eager to try new ways of digital marketing, far beyond transferring what worked on TV to a mobile screen. Unusually, the same team that designs Snap's consumer products helps design its advertising products.
"Snapchat are in creative hustle mode. When we meet with them, they are so excited about the possibilities building to IPO," said Kelly Schoeffel, director of brand innovation at ad agency 72andSunny in LA. "I've never been in a vendor meeting when all the teams left crazy excited about what could be possible. They deserve a major high five for that."
As well as lenses, Snap sells sponsored versions of its filters, where users can choose to send photos with cartoon frames showing where they are or in what they are interested.
Sometimes, these are shown to every user nationwide, for example, for the release of a blockbuster movie. Or they can be restricted to particular locations, such as in every Burger King in the US.
Alec McNayr, founder of ad agency McBeard, just finished a campaign for telecoms provider AT&T, creating geofilters that encourage people to stand up to online bullies, which could only be used in high schools and colleges. Filters and lenses show that Snapchat is at the heart of the intersection between tech and entertainment, he said.
"That is an amazingly addictive experience for people. Millions log in daily to put branded content on their face or your child's face or your dog's face," he said.
Snap will need to rely on its imagination to stay competitive, as marketers looking to buy a short video ad may be tempted to turn to Instagram stories, which has the advantage of being bought through the Facebook platform that has become a mainstay for many. Instagram can make use of Facebook data to target and measure ads, putting it far ahead of Snap's capabilities.
Scott Lindenbaum, senior vice-president and director of digital strategy at ad agency Deutsch, said that Snap should be scared of Instagram stories, because media buyers will be reluctant to take the extra steps to buy on Snap when they feel they are getting the same thing through Facebook.
"It is one of the biggest ad platforms in the world, with a humongous offshoot called Instagram and the same ad serving and retargeting platform," he said.
Jessica Rubis, social supervisor at CP+B in LA, said that another advantage of Instagram stories was having a target group that did not have to go searching for you, as they may already follow brands on the platform. "We prefer Instagram stories because it is a similar format but with different targeting, reach and exposure," she said.
To tempt more advertising dollars year after year, Snap will have to continue to create entirely new forms of advertising.
Snap has fewer users, with 160m daily active ones, compared with Instagram's at least 300m and Facebook's 1.2bn, and collects less detailed data about its userbases than its rivals. Revenue is forecast to increase rapidly to almost $1bn this year, according to eMarketer, but that would be about a quarter of what the research company estimates that Instagram will achieve.
Snap has fewer users, with 160m daily active ones, compared with Instagram's at least 300m and Facebook's 1.2bn, and collects less detailed data about its userbases than its rivals. Revenue is forecast to increase rapidly to almost $1bn this year, according to eMarketer, but that would be about a quarter of what the research company estimates that Instagram will achieve.
Snap's advantages are a large, engaged, mainly western and young audience. Its challenge is to keep them engaged.
The Los Angeles-based company recognises this challenge in its S-1 IPO regulatory filing: it describes the digital advertising industry as "rapidly changing" and warns that Instagram stories "largely mimics our stories feature and may be directly competitive".
Snap goes on to paint a picture of a company wanting to innovate to outsmart the dominant digital marketing platforms of and Facebook. It says it is willing to take risks to "create innovative and different camera products" and "innovative and engaging advertising."
"Since our products and those of our competitors are typically free, we compete based on our brand and the quality of our product offerings rather than on price. We focus on constantly improving and expanding our product lines," it says.
Snap is not alone in seeing itself as experimental. Michael Sheldon, chief executive of Deutsch North America, which has worked with clients including Taco Bell on Snapchat campaigns, cites a lack of proven results on its effectiveness.
"While there's a lot of eyeballs there, advertisers are still scratching their heads, saying I'm not quite sure how this fits into my marketing scheme."