Snapchat’s ad revenue is expected to grow to almost $1 billion in 2017, according to market research company eMarketer.
A new report shows that the social media app will earn $935.46 million in ad revenue next year. eMarketer projects Snapchat will earn about $366.69 million this year.
“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,” eMarketer principal analyst Cathy Boyle said in the report. “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.”
Snapchat’s ad business growth can be attributed to new products like Snapchat Partners, its advertising application-programming interface (API), which allows Snapchat ads to be sold by third parties. In the U.S., Snapchat’s Discover feature generates 43% of the company’s ad revenues, its largest share. eMarketer says Stories will overtake Discover as the dominant ad revenue source next year, generating 37.8% of the company’s U.S. ad business. Almost all of Snapchat’s ad revenues come from the U.S., but eMarketer predicts that a quarter of its ad revenues will come from outside the country by 2018.
More than 100 million people use Snapchat every day and the majority of users are under 35, the company says. While Snapchat amasses 31.6% of social network users in the U.S., the disappearing message startup only captures 2.3% of social network ad dollars due to launching its ad platform in mid-2015.
“Snapchat has improved its targeting capabilities and partnered with 11 measurement firms to address the concerns voiced early on,” Boyle said. “What it has yet to prove is whether it can consistently deliver a better return on investment for advertisers than other social networks.”
In an effort to challenge Snapchat’s meteoric rise in popularity, Instagram recently launched Instagram Stories, a feature that allows users to share photos and videos with a lifespan of just 24 hours.