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Why Video Could Be Snap’s Best Bet

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Digital video advertising on the rise

Cord cutting is driving growth in digital video advertising, according to a report from AppNexus. This trend is enlarging the growth opportunity for companies such as Snap (SNAP), which are into online video distribution.

According to a report from eMarketer, digital video advertising hit a milestone in the United States in 2018, accounting for 25% of the country’s total digital ad spending in the year. The uptake of digital video advertising is expected to continue as people watch less broadcast TV and more digital videos.

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Snap captured 1.4% of digital video ad dollars

Snap is already doing well in digital video advertising, and the company could continue building on this strength to maximize its revenue potential. Video accounted for 60% of Snap’s revenue, more than 55% of Twitter’s (TWTR) revenue, and 30% of Facebook’s (FB) revenue in 2018, according to eMarketer estimates.

But Snap is still dwarfed by these competitors in terms of its share of digital video advertising dollars. About $28 billion was spent on digital video advertising in the United States in 2018, eMarketer estimates show. Snap captured 1.4% of that spending, less than the 2.3% captured by Twitter and the 24.5% captured by Facebook.

Snap partners with media giants

In an effort to grow its share of digital video advertising dollars, Snap is working with media giants Comcast (CMCSA), Viacom (VIAB), and CBS Corporation (CBS) to produce shows for distribution through its Snapchat platform. Some of these partners are contributing exclusive shows to Snapchat.

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