“Location, location, location” has long been the mantra of real estate.

But Snap Inc., parent company of mobile app Snapchat, showed last week that the saying also applies to social media.

The Venice firm acquired Placed Inc. for a reported $200 million, its biggest purchase to date. Snap obtained a Seattle-based startup that measures the success of online advertisements in driving customers to buy merchandise in brick-and-mortar retail stores.

The purchase is another sign of the tech giant’s attempts to increase advertising revenue by enhancing its ability to target specific consumers and measure ad performance by tracking users’ on-the-ground behavior – services that would allow the company to charge advertisers more.

Snap is facing an uphill battle as its bigger rivals, Facebook Inc. and Google, also have location-based advertising services and combine for the lion’s share of the $83 billion digital ad market.

Google is expected to control about 41 percent of U.S. digital ad revenue this year, with Facebook’s about 20 percent, according data released by research firm eMarketer in March. Both of those firms can place ads on mobile and desktop devices.

Snap, meanwhile, is only active in the mobile ad market. It generated $150 million in revenue for the quarter ended March 31, an increase of 286 percent from the $39 million it made in the same quarter a year earlier. Almost all of the company’s first-quarter revenue came from advertising sales. EMarketer predicted Snap will reach $770 million in ad revenue this year.

The company, led by co-founder and Chief Executive Evan Spiegel, has thus far given marketers limited tools to target its users, pitching them instead on the 166 million people who use the app each day.

Snap needs to prove itself a worthy alternative to Facebook and Google, said Ali Mogharabi, an equity analyst for Chicago’s Morningstar Research Services.

“The company is looking for ways to prove to advertisers to take launching campaigns on this platform more seriously, rather than just remaining in the testing phase,” Mogharabi said. “(Snap is) trying to prove that the return on investment on this platform is attractive.”

Advertisers are hungry for location-based advertising targeting and analysis services such as those offered by Placed because a large number of consumer purchases still take place in brick-and-mortar retail stores, said Gil Elbaz, chief executive of location data company Factual Inc. of Century City.

“Location is a very powerful targeting signal that is much more powerful than cookies on your computer and what you click,” he said. “You walk or drive somewhere and it’s a very clean signal. Empirically, we see again and again campaigns showing significant lift that rely on location-derived audience segments, so we know this works.”

Many of Snapchat’s advertising products are activated at specific locations, including its geofilter feature, which allows users and businesses to sponsor augmented reality graphics within a specific area.

Placing bet

Placed raised about $15 million in venture capital since its founding in 2011.

Its software tracks consumers’ smartphone locations and can tell if someone walked into a store after viewing a geotargeted online ad. The company’s offerings would likely boost the capability of a similar Snapchat feature offered to advertisers called Snap to Store, Mogharabi said. He also noted that Placed could refer its advertising clients to Snapchat because the firm will continue to operate independently.

“Snapchat itself is working more with broad-based type of ads similar to TV ad campaigns,” said Mogharabi. “With Placed onboard, it might actually help them with targeting advertisements.”

The acquisition highlights Snap’s willingness to spend money generated by its $3.9 billion initial public offering in March. The company has also hired dozens of employees and signed leases on office space in Venice and Santa Monica, including 80,000 square feet at the Santa Monica Airport and 30,000 square feet at the Santa Monica Business Park.

Snap shares closed at $19.56 on June 7, down 20 percent from its opening-day close of $24.48 on March 2.

Its purchase of drone company Ctrl Me Robotics of Venice for an undisclosed price in December showed the firm also is experimenting with other business lines as a way to grow revenue at the rate demanded by Wall Street. Snap’s camera-equipped sunglasses, Spectacles, also fall in that category.

But the ad market is where investors will ultimately judge the firm’s growth as a business, analysts said.

“I think these are more R&D efforts in hardware rather than the beginning of a concentrated product development cycle,” said Mark Mahaney, equity analyst with RBC Capital Markets in San Francisco. “I think the company wants to keep limited its investments in hardware.”

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