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Snapchat's Ad Revenue Forecast Slashed Again by eMarketer

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Research firm eMarketer has once again slashed the 2017 U.S ad revenue estimates for Snapchat’s parent company Snap Inc (SNAP - Free Report) . This is the second time this year that the projection has been cut.

Snap is now estimated to earn $642.5 million in ad revenues from the United States compared with the earlier estimate of $770 million. In March this year, the research firm had slashed the domestic ad revenue forecast from $805 million to $770 million. On a worldwide basis, Snap’s revenues are now projected to be $774.1 million, down from the earlier projection of $900 million.

In its latest report, eMarketer stated that “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.”

Snap trails its rival, Facebook (FB - Free Report) owned Instagram, adds eMarketer, but is well ahead of Twitter. Instagram will continue its lead over Snapchat in the next few years with revenues from the United States touching $3 billion in 2017. By 2019, Instagram will earn $6.84 billion in domestic ad revenues. In contrast, Snapchat will earn $2 billion in domestic ad revenues (down from $2.2 billion forecasted in March this year) by 2019, adds eMarketer.

Instagram has seen terrific success and now has over 800 million users. Moreover, Instagram Stories, an unabashed copy of Snapchat’s feature of the same name, has more than 250 million daily actives. In contrast, Snapchat’s total daily active users are a little more than 173 million. 

Snap Inc. Price

Snap Inc. Price | Snap Inc. Quote

Snap has been working on attracting advertisers. It added three ad products in May, namely Sponsor World Lenses, Audience Lenses and Smart Geo filters. For buying video ads, Snap introduced the self serve Ad Manager in June. The company launched two more advertising tools called Snapchat Mobile Dashboard and Business Manager. Further, in order to woo advertisers, the company acquired Placed (in June), a start-up specializing in measuring the success of digital ad campaigns.

Earlier in July, Snap rolled out a tool namely Snap Publisher to help advertisers create their own ads.

Recently, the company announced the addition of 14 new Creative Partners “to provide advertisers hands-on support to plan, executive and optimize Snap Ads campaigns.” The company’s Snapchat Creative Partner program was launched in June.

All these are yet to prove beneficial. Analysts also add that the company’s lack of popularity in the international quarters and its focus only on under-30 users remain concerns.

Zacks Rank and Share Price Movement

Snap carries a Zacks Rank #3 (Hold). Notably, Snap shares have lost 39.2% of their value since its listing on Mar 2, 2017 against 7.9% growth of its industry.

Stocks  Consider

Better-ranked stocks in the broader technology sector include Applied Materials (AMAT - Free Report) and Activision Blizzard (ATVI - Free Report) . Both sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Applied Materials and Activision is currently projected to be 17.1% and 13.6% respectively.

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