Why Snap’s Latest Acquisition Is Important

Buying Placed is a step towards correcting a recent fallout for the company

Snap Inc. — the parent company of Snapchat, the popular disappearing messaging app — took a meaningful step towards correcting the fallout from its recent quarterly report on Monday when it acquired Placed, a company that leverages location-based technology to measure ad effectiveness.

To refresh your memory: Snap reported the dreaded combo of uninspiring user growth and diminishing ARPU (average revenue per user) in its first quarter since going public. Making matters worse, the company had next to nothing to say regarding its ad partnerships. With daily active users only up 5 percent from the previous quarter, and an inability to monetize its existing audience, investors were left scrambling to find where Snap would generate dollars.

That’s where Placed comes in. The Seattle-based company specializes in gauging how effectively ads translate into foot traffic for its customers. Its expertise in publishing — its partners include Hearst, Yahoo!, and Conde Nast — will lend itself well to Snapchat’s editorial partners.

Coupled with Snap’s launch of its similar “Snap to Store” tool, which allows its advertisers to measure if sponsored geofilters are leading to in-store visits, the objective is clear: Snap is doubling down on what it can offer its ad partners.

Considering the “retail meltdown” companies are grappling with, this is a true value add Snap is offering its customers.

Facebook’s mobile strategy is relevant when looking at Snap’s longterm prospects: it was so inept leading up to its 2012 IPO, it had to warn investors in an SEC filing. Mark Zuckerberg quickly changed course, realizing mobile was a path towards making “a lot more money.” Five years later, online advertising is dominated by two companies: Facebook and Google.

The parallels between post-IPO Facebook and Snap are evident. On its quarterly conference call, Evan Spiegel’s ad strategy couldn’t have been more lackluster, and reports Snap had started to offer discounted rates to lure disenchanted advertisers looked desperate. But Snap seems to have at least acknowledged the issue at hand. That’s half the battle. While Placed isn’t a panacea for all of its concerns, it is an auspicious sign for investors.

Snap has a great product, but that doesn’t guarantee a viable business (read: Twitter). Finding a way to better monetize its users — while looking to bring in more with its rollout of original content and focus on Android growth — is a critical development. It’s latest acquisition is a move in this direction.