Snapchat hasn't even been around for four years, and it's already made a significant cultural impact. The app for making disappearing photos and videos says its 100 million daily users view more than 3 billion videos every day. For perspective, Facebook's (NASDAQ: FB) 968 million daily users view just 4 billion videos each day, and YouTube is estimated to deliver about 7 billion videos per day. What's more, all of the videos watched via Snapchat are in a vertical format.
Indeed, Snapchat is largely responsible for the rise in vertical video, taking advantage of the wasted screen real estate from viewing horizontal videos on mobile devices. And while it's simple enough to resolve the problem by flipping a phone or tablet sideways, people just aren't doing it. Snapchat found that users are 9 times as likely to complete a video ad that's vertical compared with a horizontal one.
This has had a major impact on Facebook, Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) YouTube, and Twitter (NYSE:TWTR), among other social-media companies. Here's what they've done so far, and why they need to do more.
Thinking mobile first
On Google's second-quarter conference call, the company gave us a detailed update on YouTube. The key takeaway is that YouTube is dominating time spent on mobile, with the average mobile session increasing 50% year on year to 40 minutes.
Facebook users spend more time in its portfolio of apps than any other mobile applications. Between Facebook, Instagram, and Messenger, Facebook says its users are spending 46 minutes per day on mobile. And video is becoming a bigger part of Facebook. The company continues to push more videos into users News Feeds.
Twitter, meanwhile, sees the vast majority of its use through mobile. Fully 80% of its monthly active users are on mobile, and 88% of its ad revenue is from mobile. Additionally, its two secondary products, Vine and Periscope, are both mobile video apps.
Until recently, all three of these mobile behemoths have lacked support for vertical video. YouTube just released a new version of its app in July that allows vertical videos to play full-screen. Facebook is only just experimenting with full-screen vertical videos, developing a new ad format for big brands. Twitter bought into vertical video through its acquisition of Periscope and doesn't seem to have plans to bring support for full-screen vertical videos to its flagship product.
Why vertical video matters
Based on Facebook, Google, and Twitter's own data, it's evident that users are spending more time accessing their services via mobile. And all three are making pushes in video advertising. Google, for example, just announced plans to include video ads in search results, and Twitter just expanded its publisher network (which reaches 700 million people) to regular video advertisers -- not just app-install advertisers.
But without support for vertical video, those ads aren't going to return as much value for advertisers. That means Facebook, Google, and Twitter won't be able to charge as much, and more importantly, they risk losing ad revenue to Snapchat, which has integrated full-screen vertical video from the start.
Last year, Snapchat generated just $3.1 million in revenue in the first 11 months of the year. Mind you, Snapchat didn't start showing advertisements until October, so that's really just one and a half months' worth of revenue. The company introduced Discover at the beginning of this year, which has reportedly turned into a significant revenue stream as well. The company's internal target for revenue this year is reportedly $50 million and $200 million for next year.
And while that might not be much to Facebook and Google, and it's still only a small percentage of Twitter's rapidly growing revenue, it still represents a major threat to these ad-based businesses as they push more heavily into video advertising. While all three are working on consumer facing products to combat losing attention to Snapchat, they can't forget about their real customers -- the advertisers. Look for more vertical-video products from all three in the near future.
Adam Levy has no position in any stocks mentioned. The Motley Fool owns and recommends Facebook, Google (A shares), Google (C shares), and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.