Snapchat just launched an attack on a key source of Facebook's ad revenue

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Snapchat's popularity with younger users has helped it eat into an important segment of Facebook's audience. Now Snapchat is stepping up its attack on another major pillar of Facebook's business: advertisers.

Snapchat is rolling out two new tools to bolster its ad offerings, one of which is aimed squarely at a key source of Facebook's mobile ad revenue.

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Advertisers on Snapchat will now have access to goal based bidding for app install ads, an industry term that means an advertiser can target Snapchat users who are likely to install its app. Snapchat is targeting its app install ads, which ask users to swipe up on fullscreen video ads, using machine learning technology it developed in-house.

"We've been listening closely to direct response advertisers and are excited to announce the ability to 'bid for installs' in our auction," Snap director of monetization product Peter Sellis told Business Insider in a statement. "This is a new, cost-efficient way to drive app installs right from Snapchat."

The market for app install ads is growing quickly, with revenues in the US expected to reach over $7 billion by year-end 2020, according to BI Intelligence. App install ads are also a core revenue driver for one of Snapchat's main competitors, Facebook. (App install ads accounted for 17% of Facebook's total ad revenue in 2015.)

"App discovery is heavily influenced by social platforms, and Snap needs to be playing a large role in that space," Gametime VP of growth John Hession told BI via email. Gametime was an early beta tester of Snapchat's goal based bidding system for app install ads.

Hession said that Gametime's results from its targeted app install ads on Snapchat "were comparable to other large platforms," but that Snapchat's cost-per-install rates were impressive compared to competitors "running a lot more impressions and ad dollars."

Smarter targeting

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Beats was an early buyer of Snapchat's Sponsored Lens format.

Aside from app install ads, Snapchat is also beefing up its ad targeting. For the first time, advertisers can target Snapchat users who have previously interacted with other ads they've previously ran in the app.

For example, if an advertiser buys one of Snapchat's more expensive selfie filters (which the company calls Lenses) for a national campaign, now the buyer can later target those some users again with one of Snapchat's fullscreen video ads.

Creating smarter and more granular targeting abilities for advertisers will be essential for Snapchat to grow its fledgling ad business, which brought in $404 million in revenue last year.

Snapchat currently works with 15 outside partners that help sell its inventory, and in January it struck a deal with Oracle Data Cloud to show ads based on what its users buy in the real world.

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