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Snapchat ad revenues head for $1bn

News, 07 September 2016

NEW YORK: Snapchat ad revenues, which stood at a mere $59m last year, will near $1bn in 2017, according to a new forecast from eMarketer.

The research firm predicted a 519% jump to $367m this year, followed by a 155% increase to $935m next year. A more modest 88% rise in 2018 will see the messaging app's ad revenues surge to $1,760m.

And these figures referred only to paid advertising and do not include any spending by marketers that goes towards developing or maintaining a Snapchat presence.

There are several factors in the "explosive" growth that eMarketer is expecting, including the introduction of new ad products and expansion outside the US.

"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," noted Cathy Boyle, principal analyst at eMarketer.

That is enabling marketers to start to close the huge gap between usage and spending: Snapchat claims a 31.6% share of social network users in the US but takes only 2.3% of social ad expenditure.

While Snapchat Discover – news channels are run by publishers – now generates 43% of the company's ad revenues, Snapchat Stories – a string of snaps that are joined together – is slated to become the top source of ad revenue in 2017, when it will take almost 38% of the app's US ad business,

In addition to the wider range of ad products on offer, the app will also be increasingly looking to monetise users outside the US, which currently accounts for 95% of its ad revenues.

Within the next two years, eMarketer anticipated that a quarter of its ad revenues would come from overseas markets such as the UK where the brand has built a significant user base.

Snapchat's appeal to younger millennials and Generation Z means it was inevitable that advertising expenditure would follow at some point, but the fact that messages typically disappear shortly after being opened has meant a rethink of the creative approach.

Targeting and measurement capabilities also needed to improve before marketers were prepared to commit large sums to the channel.

While all these have been addressed, Boyle added: "What it has yet to prove is whether it can consistently deliver a better return on investment for advertisers than other social networks."

Readers can download a free copy of Warc's Guide to Advertising on Snapchat.

Data sourced from eMarketer; additional content by Warc staff