Although Snapchat’s market share of social media networks is about 31 percent in the U.S., the app’s share of total ad revenues in the segment is just 2.3 percent. But that is changing, according to research from eMarketer, which expects the social network’s ad dollars to reach $935 million next year, up from about $366 million this year.
“After weathering criticism of its initial ad offerings, Snapchat is poised for explosive growth in ad revenues in the coming years,” said the researchers from eMarketer in its first forecast of ad dollars for Snapchat.
The report noted that Snapchat gets 95 percent of its ad dollars from the U.S. “However, as it begins to monetize users in other countries where it has a substantial user base — particularly the U.K. — the non-U.S. share of its ad revenues will grow. By 2018, a quarter of its ad revenues will come from outside the U.S.,” the reported stated.
Principal analyst Cathy Boyle said that advertisers “are attracted to Snapchat for its broad reach among young Millennials and those in Generation Z, which are valuable demographic groups for many businesses. To engage those often hard-to-reach consumers, Snapchat has expanded its advertising portfolio over the past year to include a wider array of video ads, and more sponsored geofilters and sponsored lenses.”
EMarketer said in its report that Snapchat “faces challenges as it competes with more established players Facebook and Twitter, particularly in the areas of targeting and measurement.”
“In the U.S., Snapchat’s Discover feature generates the largest share (43 percent) of the company’s ad revenues,” the researchers said. “That balance will shift next year, as Stories overtakes Discover as the dominant ad revenue source, generating 37.8 percent of the company’s U.S. ad business.”
Boyle said the social networking platform has “improved its targeting capabilities and partnered with 11 measurement firms to address the concerns voiced early on. What it has yet to prove is whether it can consistently deliver a better return on investment for advertisers than other social networks.”