Analysts Hedge Snap, Inc. Revenue Forecasts

In 2021, Snap, Inc. will soak up ad revenues in the neighborhood of $2 billion to $3.4 billion, according to a fresh forecast from Pivotal Research.

That wide range is largely due to Snap’s immaturity, according to Pivotal analyst Brian Wieser.

“The relative novelty of Snap’s platform and the fact that Snap’s current sales leadership has not yet been in place for even a year means we have little history against which to base our expectations,” Wieser writes in a new report.

Ahead of Snap’s big IPO, Wieser isn’t the only one questioning the company’s growth potential. As Business Insiderreported, this week, Snap executives have been peppered with questions about competition from Facebook, user growth for the disappearing-message app, and accessibility in less developed markets.

Wieser has also suggested 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, as Wieser recently outlined, is that the self-described “camera company” views decline in TV consumption in the same way that viewing has historically been defined.

This perspective, argued 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 estimated.

“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.

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