Snap (SNAP - Free Report) , the parent company of Snapchat, recently announced a slew of enhancements to its ad offerings to attract advertisers, especially during the holiday season.
The company launched Collection ads, which will help advertisers add a collection of four products in a single ad on Snapchat. The new ad format is reportedly leading to higher engagement rates. Brands like Guess and eBay saw their engagement rates increase four and five times, respectively.
The addition of Product catalogs will help advertisers automate the creation of ads when they upload their product feeds to Snap’s Ad Manager.
Moreover, the targeting capabilities of Snapchat’s conversion tracking tool, Snap Pixel have been expanded. The tool, which helps advertisers measure traffic growth on their websites can now can be used to create target lists based on what areas of websites have been visited by Snapchatters.
Furthermore, Snap added more than 30 new partners to help advertisers leverage the platform’s ad offerings.
Ad Revenues Look Bleak
Advertising is the primary source of revenues for Snap and therefore increasing its effectiveness is the company’s priority.
We note that the recent announcement comes on the heels of market research firm, eMarketer, slashing its ad revenue forecast for Snap, citing the latter’s shift in the way ads are sold on the platform.
Although Snap’s shift to an automated or programmatic ad delivery system has increased the number of advertisers on the platform, it has resulted in lower ad prices, which is impacting its results.
The research firm projects Snap’s ad revenues in the United States for the current year to be $662.1 million, down from $1.03 billion projected in March. Moreover, the firm anticipates that the company will not be able to cross the $1 billion mark in U.S. ad revenues until 2020.
Although revenues on a year-over-year basis are expected to rise 18.7% in the current year, the figure is way below last year’s growth of 85.6%.
In its report, the UK market also does not look good for the company. Snap is now expected to generate £68.4 million in UK ad revenues, which is nearly 35% lower than what was projected in March.
Snap’s focus to bring more effective advertising tools will help it withstand stiff competition in the digital ad market from the likes of Alphabet’s (GOOGL - Free Report) Google, Facebook (FB - Free Report) and Twitter (TWTR - Free Report) .
eMarketer in its report had further added that Snapchat currently accounts for 0.5% of U.K.’s digital ad market, way behind Google and Facebook, which control 39.1% and 21.7% of the digital ad market in the UK, respectively.
Per another report by the firm, U.S. social network video ad revenues will reach $11.69 billion in 2020, more than doubling from 2017. Facebook (including Instagram video ad revenues) will generate $10.2 billion, which equates to 87.3% of the total market share, while Snap‘s video ad revenues will total $724.1 million, representing 6.2%. However, Snap's video ad revenues are expected to be close to Twitter, which is likely to generate $743.8 million in 2020.
Snap currently has a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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