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eMarketer lowers UK Snapchat ad forecast

September 26, 2018

eMarketer has significantly lowered its projections for Snapchat’s UK ad revenues for 2018 and beyond, as an increasingly automated buying system brings down prices. This year, Snap will generate £68.4 million (€74.9m) in net UK ad revenues, lower than the £104.8 million ($134.9 million) eMarketer had projected in March.

The downgraded figures are mainly due to Snap’s shift to an ad delivery system that is about three-quarters programmatic. As a result, we believe Snapchat’s UK ad revenues will increase 92.7 per cent this year. However, the growth rate will continue to decline as the platform matures in the UK.

“Snap rolled out its programmatic ad platform in June 2017. While the transition to a self-serve format has increased the number of advertisers, it has also resulted in lower ad prices overall,” said eMarketer principal analyst Debra Aho Williamson. “Programmatic ads are typically cheaper because the automated auction infrastructure reduces (and sometimes eliminates) the need for salespeople to get involved. Some advertisers report strong ROI from programmatic ads on Snapchat, but many others remain skeptical. They are concerned about the size of Snapchat’s audience and feel that measurement and targeting still lag behind Facebook.”

The revenue adjustment now means Snap controls 0.5 per cent of the UK digital ad market—slightly up from last year, but below the 0.8 per cent previously predicted.  For comparison, Google and Facebook control a combined 60.8 per cent of UK digital ad spending (39.1 per cent and 21.7 per cent, respectively).

As a result of the downgraded forecast, Snap will capture just 0.7 per cent of the UK mobile ad market this year, lower than the 1.1 per cent previously expected. Snap derives its ad revenues entirely from mobile.

“We believe Snap’s transition to programmatic was the right move, since it makes it easier for advertisers to buy ads,” Williamson said. “But Snap also needs to restore user engagement, after its worldwide daily active user count fell by 3 million in Q2. Usage declines are a big red flag for advertisers.”

Snapchat will still see usage gains this year. We forecast that it will have 16.2 million monthly active users in the, up 8.6 per cent over last year. By that metric, it will grow faster than both Facebook and Twitter user gains (2 and 1.9 per cent, respectively), but slower than Instagram (9.7 per cent).

Snapchat is the most popular app among teens. In fact, it will continue to add users ages 12 to 17, while Facebook will continue to lose users in that cohort. We forecast that Snapchat will add 300,000 new users in that age group by 2022, while Facebook will lose 100,000.

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