Researcher eMarketer significantly lowered its projections for Snap’s ad revenue for this year and beyond, saying the platform’s reliance on an automated ad buying system is driving down prices.

eMarketer estimates Snap will generate $662.1 million in ad revenue in the U.S. this year — well below the $1.03 billion it had forecast. The researcher expects Snap won’t break the $1 billion revenue barrier until 2020.

The downgrade takes into account Snap’s transition in 2017 to an ad delivery system that heavily relies on programmatic buying. Snapchat’s U.S. ad revenue will increase 18.7% this year, but that marks a dramatic slowdown from from last year’s gains of 85.6%.

eMarketer expects growth to accelerate in 2019 and 2020, as the platform attracts more advertisers.

“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.”

US Snapchat Net Digital Ad Revenue Forecast


As a result of its downgraded forecast, eMarketer predicts that Snap will capture a tiny fraction (0.6%) of the digital ad market in the U.S., compared with Google and Facebook, which control a combined 57.7% of U.S. digital ad spend.

Williamson said Snap’s transition to programmatic buying makes it easier for brands and marketers to buy ads, but adds that the platform needs to shore-up user engagement.

In its most recent quarter, Snap reported a drop in the number of daily active users, which fell to 188 million (down 3 million from the previous quarter.) One Cowen & Co. survey found that Snapchatters were spending less time on the app: averaging about 33 minutes a day in the second quarter, down about 7% compared with the prior year.