Analysts at eMarketer predict that SnapChat will go beyond the billion mark in ad revenues by 2017. The firm estimates that the popular mobile messaging app will make about $366.69 million in ad revenues this year, but the figure will grow to $935.46 million by 2017.
The immense popularity of SnapChat is causing its explosive growth, making it one lucrative channel for advertisers. In addition, SnapChat is able to lure millenials into the platform, giving the social network a wider ad portfolio and ad targeting improvements.
According to a Recode report, SnapChat’s $366.69 million ad revenues were higher than the internal goals the company set for itself in 2016. Sources reveal that the network was only targeting between $300 million and $350 million this year, which is about 6 to 7 times higher than its projected revenues last year.
Meanwhile, eMarketer’s $1 billion estimate is in line with the details found in a leaked SnapChat presentation deck, predicting revenues between $500 million to $1 billion in 2017.
Snapchat has seen unprecedented growth in its ad business in 2016, thanks to new offers such as its advertising API (application programming interface), Snapchat Partners. The advertising API allows SnapChat ads to be sold by third-parties, similar to its competitors. According to eMarketer, a broader portfolio, more sponsored geofilters and lenses gave the video sharing network a boost in revenues.
The app’s Discover feature, which allows users to see content from brands like ESPN, CNN, Vice and Warner Music, is its main moneymaker, generating 43% of its share of ad revenues in the US. However, eMarketer analysts expect Stories to surpass Discover by next year. At the moment, the US market is the most critical to the social network’s ad business, accounting for 95% of SnapChat’s revenues. But not for long, eMarketer estimates that a quarter of its ads revenues will come from sources outside of the US by 2018, particularly in Britain where SnapChat is immensely popular.
“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,” said eMarketer principal analyst Cathy Boyle. “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.”
Although SnapChat generates a strong 31.6% share of social network users in the United States, the network is only capturing 2.3% of social network ad dollars. The challenge now is to convince advertisers that the photo and video sharing platform provides a better return on investment than larger, more established channels on social media.
“Snapchat has improved its targeting capabilities and partnered with 11 measurement firms to address the concerns voiced early on,” said Boyle, referring to the criticisms SnapChat faced regarding its ads offers. She added that the social network is also set to face more challenges as it competes with Facebook Inc (NASDAQ:FB) and Twitter Inc (NYSE:TWTR) to maintain its growth.