Relative to Google’s video hub, “Snap will increasingly be able to do the same as well,” Pivotal Research analyst Brian Wieser predicts in a new investor note.
That said, Wieser believes that Snap may have overstated the degree to which ad dollars are shifting from TV to digital channels, in its recent S-1 filing.
The problem according to Wieser is that self-described “camera company” views decline in TV consumption in the same way that viewing has historically been defined.
This perspective, argues Wieser, “will overstate the degree to which budgets may shift from owners of conventional TV networks to digital media owners with TV-like characteristics,” i.e., Snap and other video platforms.
Citing Nielsen data, Snap’s S-1 explains: “People between the ages of 18 and 24 spent 35% less time watching traditional TV in an average month during the second quarter of 2016 compared to the second quarter of 2010.”
Yet, the definition of TV on which this decline is based excludes most consumption of video content through VOD, video game consoles, over-the-top devices, on laptops, desktops, tablets and other mobile devices -- if they are not attached to TV sets.
Including these other platforms, viewing has likely risen slightly across all age groups over the past six years, Wieser estimates.
“Excluding short-form content such as that which dominates YouTube, consumption levels are probably closer to flat across most populations when we compare comprehensive data for any given age group vs. that same age group in prior years,” he contends.
At the moment, advertising is everything to Snap. Last year, in fact, ads accounted for 96% of the company’s revenue.
Regardless of where it’s coming from, Snap is attracting more ad dollars. Last year, it saw revenue of $404.5 million -- up more than 600% from the $58.7 million it generated in 2015.
Snap is also successfully making more ad revenue from each its users. Worldwide, average revenue per user (ARPU) in the last three months of 2016 was $1.05 -- up from $0.31 during the same period a year earlier. In North America, Snap’s ARPU in the last three months of 2016 was $2.15 -- up from $0.65 year-over-year.