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eMarketer Lowers Snap Ad Forecast

US Snap ad revenues downgraded 36% for 2018 as programmatic reduces prices

September 25, 2018 (New York, NY) – In its latest advertising forecast, eMarketer has significantly lowered its projections for Snapchat’s US ad revenues for 2018 and beyond, as an increasingly automated buying system brings down prices. This year, Snap will generate $662.1 million in net digital ad revenues, lower than the $1.03 billion eMarketer projected in March. We now expect that Snap will not break $1 billion in US ad revenues until 2020.

The downgraded figures are mainly due to Snap’s shift to an ad delivery system that is about three-quarters programmatic. As a result, Snapchat’s US ad revenues will increase 18.7% this year, significantly lower than the 85.6% in 2017. However, we expect growth to be higher again in 2019 and 2020 as the platform attracts more advertisers to bid up prices.

“Snap rolled out its programmatic ad platform in June 2017. While the transition to a self-serve format has increased the number of advertisers, it has also resulted in lower ad prices overall,” said eMarketer principal analyst Debra Aho Williamson. “Programmatic ads are typically cheaper because the automated auction infrastructure reduces (and sometimes eliminates) the need for salespeople to get involved. Some advertisers report strong ROI from programmatic ads on Snapchat, but many others remain skeptical. They are concerned about the size of Snapchat’s audience and feel that measurement and targeting still lag behind Facebook.”

The revenue adjustment now means Snap controls 0.6% of the US digital ad market—the same as last year, and below the 1% previously predicted. For comparison, Google and Facebook control a combined 57.7% of US digital ad spending this year (37.1% and 20.6%, respectively).

As a result of the downgraded forecast, Snap will only capture 0.9% of the US mobile ad market this year, lower than the 1.4% previously expected. Snap derives its ad revenues entirely from mobile.

“We believe Snap’s transition to programmatic was the right move, since it makes it easier for advertisers to buy ads,” Williamson said. “But Snap also needs to restore user engagement, after its worldwide daily active user count fell by 3 million in Q2. Usage declines are a big red flag for advertisers.”

Snapchat will still see usage gains this year. We forecast that it will have 84.8 million monthly active users in the US, up 7% over last year. By that metric, it will grow faster than both Facebook and Twitter user gains (both 0.9%), but slower than Instagram (13.1%).

Snapchat is the most popular app among teens. In fact, it will continue to add users ages 12 to 17, while Facebook will continue to lose users in that cohort. We forecast that Snapchat will add 1.2 million new users in that age group by 2022, while Facebook will lose 2.2 million.

 

Methodology
eMarketer’s forecasts and estimates are based on an analysis of quantitative and qualitative data from research firms, government agencies, media firms and public companies, plus interviews with top executives at publishers, ad buyers and agencies. Data is weighted based on methodology and soundness. Each eMarketer forecast fits within the larger matrix of all its forecasts, with the same assumptions and general framework used to project figures in a wide variety of areas. Regular re-evaluation of available data means the forecasts reflect the latest business developments, technology trends and economic changes.

 

About eMarketer
Founded in 1996, eMarketer is the first place to look for research about marketing in a digital world. eMarketer enables thousands of companies worldwide to understand marketing trends, consumer behavior and get the data needed to succeed in the competitive and fast-changing digital economy. eMarketer’s flagship product, eMarketer PRO, is home to all of eMarketer’s research, including forecasts, analyst reports, aggregated data from 3,000+ sources, interviews with industry leaders, articles, charts and comparative market data. eMarketer’s free daily newsletters span the US, EMEA and APAC and are read by more than 200,000 readers globally. In 2016 eMarketer, Inc. was acquired by European media giant Axel Springer S.E.

 

For more information, contact:
Douglas Clark
PR Director, North America
646-863-8807
dclark@emarketer.com

Posted on September 25, 2018.