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eMarketer Lowers Snapchat's Ad Revenue Forecast for 2017

Platform remains in the experimental bucket for many marketers

October 2, 2017 | Media Buying

Snapchat’s worldwide ad revenues will total $774.1 million this year, but growth will be slower than eMarketer predicted a year ago. Although many advertisers remain on the sidelines, Snapchat’s ad products are tantalizing for some because of its creative capabilities, its highly engaged user base and its emerging reputation as an alternative to Facebook.

However, several factors, including slower-than-expected user growth, have led eMarketer to lower its ad revenue outlook for Snapchat. In March 2017, eMarketer predicted Snapchat’s worldwide ad revenues would reach $900 million for the year. (eMarketer’s October 2016 forecast called for worldwide ad revenues of $935.5 million in 2017.)

Those are just some of the conclusions from eMarketer’s new report, “Snapchat Usage and Advertising 2017: Separating Fact from Fiction.” (Subscribers to eMarketer PRO can access the report here. Nonsubscribers can purchase the report here.)

Snapchat Ad Revenues Worldwide, 2016-2019 (millions and % change)

eMarketer expects Snapchat’s US ad revenues will total $642.5 million this year. That’s down from $770 million eMarketer predicted in March 2017, and from $805 million forecast in July 2016.

However, eMarketer expects strong growth over the next two years, with US ad revenues topping $2 billion by 2019. That’s down from eMarketer’s March 2017 forecast of $2.2 billion for 2019.

Snapchat is still on track to surpass Twitter in US ad revenues next year. eMarketer projects Snapchat will rake in $1.18 billion in revenues, vs. $1.16 billion for Twitter. In 2019, Snapchat will pull well ahead, with US ad revenues that will nearly double Twitter’s.

By comparison, Instagram is already well ahead of Snapchat in the US, and will continue to widen that gap over the next few years. eMarketer estimates Instagram will bring in just over $3 billion in US ad revenues this year, rising to $6.84 billion in 2019.

Despite all of its improvements in ad products and measurement, Snapchat remains in the experimental bucket for many marketers. They give it high marks for its creative possibilities and its ability to attract a youth audience, but many have yet to make it a must-buy.

A February 2017 survey of US ad and marketing professionals by Advertising Age and RBC Capital Markets found that 26% of respondents were devoting 1% or more of their digital ad budget share to Snapchat, and the vast majority of those were in the 1% to 10% share range.

Percent of Digital Ad Budget Allocated to Select Social Media Platforms According to US Ad/Marketing Professionals, Feb 2017 (% of respondents)

Snapchat trails more seasoned ad platforms, but that’s to be expected. (The Advertising Age/RBC survey didn’t include Instagram in this particular question.) One notable finding was that 67% of respondents were devoting ad dollars to Twitter, but 54% were in the 1% to 10% budget share range.

Snapchat has made several ad product advances in the past year, notably the launch of a self-serve ad buying system, as well as targeting and creative tools for direct-response advertisers. It now has 15 measurement partners.

Despite these advances, many advertisers remain skeptical.

The viewpoints of marketing executives at Nestlé are emblematic of the way many advertisers feel about Snapchat right now. As of March 2017, Nestlé had conducted 40 ad activations in six markets on Snapchat, according to an article in The Drum.

Despite the multiple tests, Pete Blackshaw, Nestlé’s global head of digital and social media, wasn’t convinced. “We like to jump into relationships with platforms with a very strong learning plan,” he said in the article. “Once we have the confidence that a medium works, pays out and builds the business, we are all in, especially if Snapchat can continue to do that and continue to help us decipher the very complicated nature of our kids.”

Some alcohol advertisers, meanwhile, are nervous about Snapchat’s ability to age-gate its advertising.

In an August 2017 Digiday article, Jayme Buonocore, digital director at William Grant & Sons distilleries, worried that Snapchat’s demographics were too young and said there was a risk of some types of ads being shared with underage users, since Sponsored Geofilters and Sponsored Lenses can be passed around.

“I am a big fan of Snapchat as a platform, and I see so much potential there for our brands,” Buonocore said. “We just have to wait for the demographics of the community—or the advertising options—to catch up to our responsibilities as marketers of spirits.”

In the latest episode of "Behind the Numbers," eMarketer analyst Debra Aho Williamson discusses some of the reasons why eMarketer has changed its estimates for Snapchat. This episode is made possible by Oath.

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