How Does Snapchat Make Money?

Company: Snapchat
CEO: Evan Spiegel
Year founded: 2011
Headquarter: Santa Monica, California, USA
Number of Employees (Dec 2018): 2884
Public or Private: Public
Ticker Symbol: SNAP
Market Cap (April 2018): $15.72 Billion
Annual Revenue (Dec 2018): $ 1.18 Billion
Profit |Net income (Dec 2018): (- $ 1.26 Billion)

Products & Services: Camera | Friends Page | Discover | Snap Map | Memories | Spectacles
Competitors: Twitter | Tik Tok | Instagram | Facebook (WhatsApp)| Google (YouTube) | Line | Kakao |Naver | Tencent

Fun fact

Snapchat has 186 million Daily Active Users (DAU)

Snapchat is a mobile and photo messaging application that enables you to share whatever photos and videos you prefer that will eventually self-delete in a short period of time.

It basically means that you have to depend on the timing to ensure that whatever picture/video you take is shared instantly before it is auto-deleted and lost forever.

You don’t have to worry about forgetting to delete your previous picture or even make an effort to remove it from your app.

Snapchat Features

Snapchat’s business model has been a unique case in the sense that they use a data-driven approach to create features for its loyal customer base. They understand exactly what its demographic wants and capitalizes upon it. Everything that they find trendy, engaging and appealing they have adopted and utilized it effectively.

Lenses

Snapchat utilizes augmented reality (AR) to make different kinds of lenses that have an attractive outlook. The technology used to create these lenses are brand new and have not been used in this field by any other entity.

Users widely use this feature for entertainment purposes where they can make changes to their voice and face and add other interesting effects to it.

Geofilters

Snapchat uses different types of filters known as Geofilters which are basically frames on videos or pictures. They can be modified artistically in a variety of occasions and locations.

Discover

Publishers and content creators have noticed the growth of Snapchat in the marketing business and have sought to have their fair share of the profits.

They hope to do this by providing their content over snapchat. Many of such publishers include Buzzfeed, MTV, National Geographic, etc. They can submit their news and other content on this platform.

Stories

By far Snapchat’s most exciting feature is its story section. It allows you to tell your story to the world. This has proven to be a hit by many of its users who utilize this feature in an increasing number.

Users can capture any images they prefer or form them to videos to convey their storytelling. Many other features such as lenses and Geofilters are also used to make the respective stories.

Live stories

Live Story allows Snapchatters in the same event and the same location to contribute to a specific narrative. They can make up a single story together.

Interesting partnership – Shazam Integration

Snapchat entered into a partnership with Shazam and now both enable their users to identify any of their favorite songs on Snapchat. The partnership has expanded its accessibility to millions of new audiences and converted them into users.

That said, most of the services are provided by Shazam. If the users want, they can get their information about the artists playing the song in their Snapchat ID.

Shazam has lauded the partnership, citing it as one of their most successful ones yet.  This served as one of Snapchat’s most important feature as well as revenue generating source for its business model.

Now that we understand Snapchat app features, let’s see how SnapChat uses these features to make money and how much does it cost to run ads on SnapChat?

How Does Snapchat Make Money?

How Does Snapchat Make Money?
How Does Snapchat Make Money?

Snapchat makes the majority of its money by selling ads to companies on the fixed fees basis or ads per impression basis (number of times an ad is viewed). Besides, they also sell hardware merchandise, which is a small portion of their overall revenue.

Let’s see in more detail below:

1. Sponsored Lenses

Snapchat provides augmented reality (AR) generation lenses that have become a hit with teenagers. Since it has become trendy, Snapchat has sought to capitalize on its usage. Hence why it updates them every single week.

Companies who have sought to adopt this feature from the likes of Gatorade, Taco Bell, and others have seen massive user traffic.

Snapchat tries to set itself apart from its competitors like Facebook (WhatsApp, Instagram) and Google (YouTube) by utilizing its advertisements in such a way that users can find them enjoyable and engaging.


Cost: According to wallaroomedia report, sponsored lenses rates vary based on the days it runs:

  • $450,000 per day (Sunday – Thursday)
  • $500,000 per day (Friday & Saturday)
  • $700,000 per day (Special events – Super Bowl, holidays, etc.)

Here are a few examples:

Gatorade – Famous Super Bowl Filter

2. Sponsored Geofilters

Geofilters are filters that are specially constructed for special occasions or certain locations. Many event organizers, as well as a myriad of companies, have taken the lead to partner with Snapchat to access these Geofilters.

Snapchat offers it’s very own “On Demand Geofilters” which is used by many businesses and movies alike to promote their sales.

Millions of teenagers are known to use Snapchat; hence businesses make filters for their target demographic to raise the bar of their brand equity. For example, Vans’ 50th-year-anniversary celebration had featured Geofilters, which had reached to over 32 million snapchatters with 98 Million+ views.

 

Cost: Sponsored Geofilters rates are about 1/5 of sponsored lenses rates

  • $100,000 per day (approximately)

3. Discover

Many publishers have pursued a partnership with Snapchat in a bid to utilize its platform and provide everyday news and feed to its users.

This gives users an incentive to spend more time on this particular feature especially when studies suggest that they spend at least 30 minutes on Snapchat per day.

The publishers, on their part, pay Snapchat a substantial amount of money. This enhances Snapchat’s revenue.

Cost: Discover Ads are placed at the very top of the app, and hence they are most expensive, and their rates:

  • Ranges from $50,000 – $500,000 per day (nationwide ads for premium brands)
  • $50 per day (for small businesses, a much affordable option “Snap Ads to AR” is available – it’s a 10-second ad between video, users can swipe up to view these ads)

4. Sponsored Stories

Snapchat has its very own stories section which it uses to place their sponsored stories. This makes it more convenient for their users to see these stories while they scroll through their friend’s content.

Taco Bell itself adopted this feature to launch their own product. This strategy of advertising proved to be so successful that Facebook adopted a similar approach to Instagram as well.

Cost: Live stories ads are a part of the discover section and their rates:

Starts at $250,000

5. Snap Store

Recently, Snapchat has focused on expanding its services which would be best suited to sell its merchandise like Spectacles, emoji Snap streak hat, Dog Lens tee, dancing hot dog, etc.

It banked on Snap Store to do that job. Since then, the company has capitalized on this feature. Users can find the store on the discover tab.

Cost:

Spectacles: starts at $149.99

In Conclusion

Snapchat has used all the right tools and the right strategies to generate its revenue. It continues to form new partnerships and has never let an excellent opportunity walk past its business prospects. If it sustains itself in the long term, it will continue to operate among the masses without fearing any obstacles.

Tell us what you think? Did you find this article interesting?                                                   
Share your thoughts and experiences in the comments section below.

S.K. Gupta

S.K. Gupta

A management consultant and entrepreneur. S.K. Gupta understands how to create and implement business strategies. He is passionate about analyzing and writing about businesses.

3 comments

  1. Thank you very much for sharing ♥️

    1. You are welcome Abir,
      I am glad you liked the article ! Happy reading !

  2. Very coo! Fun to read.

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