{"id":31890,"date":"2023-10-19T14:05:41","date_gmt":"2023-10-19T14:05:41","guid":{"rendered":"https:\/\/innodebt.com\/business\/snapchat-isnt-just-for-teens-anymore-now-it-needs-to-make-some-real-money\/"},"modified":"2023-10-19T14:05:42","modified_gmt":"2023-10-19T14:05:42","slug":"snapchat-isnt-just-for-teens-anymore-now-it-needs-to-make-some-real-money","status":"publish","type":"post","link":"https:\/\/innodebt.com\/?p=31890","title":{"rendered":"Snapchat isn\u2019t just for teens anymore. Now it needs to make some real money"},"content":{"rendered":"
\n

\n When Snapchat announced last month that it had reached 5 million paying subscribers for its Snapchat+ service, it seemed like a stunning achievement. The milestone marked the halfway point to the 10 million subscriber number that CEO Evan Spiegel had just months earlier identified as a \u201cmedium-term\u201d goal.\n <\/p>\n

\n The service\u2019s success in just 15 months after launching proved that despite Snapchat\u2019s reputation as an app used mainly by teens, users are willing to cough up money for a premium experience on the platform. At 5 million subscribers paying $3.99 per month, Snapchat+ is set to earn around $239 million in annual revenue.\n <\/p>\n

\n That subscriber number is just a fraction of its overall user base of Snapchat, which has quietly become one of the world\u2019s fastest-growing social platforms. As of the end of June, it reported 397 million daily active users \u2014 more than X, the platform formerly known as Twitter. The company\u2019s challenge now is figuring out how to successfully monetize those users to turn around a streak of disappointing financial results. When Snap reports earnings next week for the quarter ended in September, it\u2019s expected to post its third consecutive revenue decline.\n <\/p>\n

\n Despite having invented some of the most important social media features over the past decade \u2014 stories and filters \u2014 Snapchat is often thought of as an app mainly for young people with less reach and cultural relevance than rivals like TikTok, Instagram and Facebook. But Snapchat\u2019s user growth suggests that the app remains among the most dominant platforms, even as (and perhaps because) it\u2019s charting a different course from most competitors. As other platforms increasingly lean into discoverability and showing users entertaining content from people they don\u2019t know, Snap remains focused on its longtime strategy of connecting users with their real-life social circle.\n <\/p>\n

\n \u201cAt the end of the day, you have a better time connecting with the people you care about most, and we want to make sure that those connections are enduring and that we can provide experiences to enhance them,\u201d Jack Brody, Snapchat\u2019s vice president of product, told CNN. \u201cBy focusing on that, we feel like we\u2019re solving problems that real users face every single day, and creating real, differentiated value.\u201d\n <\/p>\n

\n Still, revenue growth hasn\u2019t kept pace with those user gains. In the first six months of this year, Snap\u2019s sales dipped more than 5% compared to the year-ago period, and it posted an operating loss of $769 million. Snap\u2019s (SNAP) shares are down more than 11% since this time last year.\n <\/p>\n

\n The sales declines come as Snapchat, like other platforms, works to update its advertising business to cope with changes to Apple\u2019s app tracking policies. And it comes as the company funnels money into innovations in artificial intelligence and augmented reality.\n <\/p>\n

\n Snap has also faced lawsuits from parents alleging the app contributed to their children\u2019s mental health struggles or enabled them to buy illicit drugs, with sometimes fatal outcomes. (Snapchat says it has a range of safety features to protect young users, including restrictions on friend suggestions and requests from strangers, default privacy settings and parental oversight options.)\n <\/p>\n

\n Still, analysts say Snap\u2019s user growth continues to represent a major opportunity for the company.\n <\/p>\n

\n \u201cIn my view, there\u2019s significant value for a company that\u2019s growing its installed base at this level,\u201d said Angelo Zino, senior equity analyst at CFRA Research. \u201cAt the end of the day, when you think about advertisers, they want to go where the eyes are.\u201d\n <\/p>\n

\n Snapchat gained popularity following its 2011 launch for the ability to send disappearing photos to friends, with the option to add silly filters. Two years later, Snapchat launched Stories, where users could share a series of photos and videos to all of their friends that would be viewable for only 24 hours, creating demand for more spontaneous, ephemeral types of content across social media.\n <\/p>\n

\n Since then, Snapchat has continued to expand, adding features like a \u201cDiscover\u201d section with public content and the Snap Map, where users can see their friends\u2019 locations and public posts from popular locations. The company has also invested in more ambitious, experimental projects like a selfie drone, which it discontinued following mass layoffs last year, and AR glasses, investment in which has also been scaled back.\n <\/p>\n

\n But its core mission is to allow users to have more private conversations with their friends. And that\u2019s fueled an ongoing boom in its user numbers. Snapchat has grown its user base by more than 10% year-over-year for the past 16 consecutive quarters.\n <\/p>\n

\n \u201cThat interpersonal and small group focus is really important and appealing especially to younger social media users who don\u2019t want to broadcast their entire lives to mass audiences,\u201d the way they would on TikTok or Instagram, said Jess Maddox, an assistant professor at the University of Alabama who researches social media platforms and internet popular culture.\n <\/p>\n

\n Snapchat says that much of its daily user base is distinct from other platforms, according to a study of 10,000 users conducted on Snap\u2019s behalf by market research firm GWI during the first half of 2023. The group found that 43% of the people aged 16-64 who used Snapchat did not use TikTok, and more than half of daily Snapchatters in the same age range were not using YouTube on a daily basis.\n <\/p>\n

\n \u201cSnapchat was really kind of created as an antidote to traditional social media,\u201d Brody said. \u201cThis was a platform for connecting with your closest friends, not everybody you\u2019ve ever met \u2026 and because of that, people come to Snapchat for a very different reason than why they go to other platforms.\u201d\n <\/p>\n

\n Market research firm Insider Intelligence estimated in a June report that Snapchat would overtake TikTok as the fastest growing platform worldwide as of the end of 2023. Already, parent company Snap said at its February investor day that it has 150 million monthly active users in North America \u2014 a figure that mirrors the number of users that TikTok says it has in the United States (although TikTok did not specify how often those users are interacting with the app).\n <\/p>\n

\n A major portion of that growth is coming from outside of the United States. Snapchat has, for example, made a big push into India, following the country\u2019s TikTok ban in 2020. Users from outside of North America and Europe now make up more than half of Snapchat\u2019s daily active user base and grew at a rate of 25% year-over-year in the second quarter of 2023, compared to 14% overall daily active user growth.\n <\/p>\n

\n Snapchat\u2019s task now: making a meaningful profit from all of those users.\n <\/p>\n

\n \u201cThe biggest reason [for its financial challenges] is that when you think about Snap, they are largely a messaging platform, and it is extremely difficult \u2026 to monetize messaging platforms,\u201d CFRA\u2019s Zino said. Other major tech companies that operate messaging platforms, including Meta and Apple, don\u2019t count on those services to generate significant revenue, if any.\n <\/p>\n

\n What\u2019s more, advertisers are increasingly looking to invest in so-called \u201cdirect response\u201d advertising where users are immediately prompted to buy a product \u2014 advertising that is much more easily done on a platform like Instagram or TikTok where users are already often discussing specific products and it\u2019s easy to link to an advertiser\u2019s website or push users to buy directly on the platform\u2019s e-commerce section. Snapchat, by contrast, has traditionally leaned more heavily into brand awareness.\n <\/p>\n

\n \u201cWhile there still is brand advertising online for sure, I think that there are a lot of challenges and a lot of conversations about what this looks like going forward,\u201d said Scott Kessler, global technology sector lead at research firm Third Bridge. \u201cSnap is in a uniquely challenged position because of its historical focus on brand advertising.\u201d\n <\/p>\n

\n Snapchat has also placed a greater emphasis on user privacy than many of its peers \u2014 a boon to users but a challenge for advertising, Kessler noted.\n <\/p>\n

\n Engagement time on Snapchat may also play a role \u2014 the app has the lowest user time spent compared to social media peers, likely owing to its focus on messaging rather than endless scrolling through content, according to market intelligence firm SensorTower. The average Snapchat user in the third quarter of 2023 spent just 19 minutes per day on the app, compared to 103 minutes per day on TikTok, 60 minutes per day on Instagram and 28 minutes per day on X, SensorTower data shows.\n <\/p>\n

\n But Snapchat says its users are checking in on the app regularly \u2014 40 times a day on average in the United States, according to Brody.\n <\/p>\n

\n Spiegel said during Snap\u2019s July earnings call that following its restructuring last year, which cut 20% of its staff, the company is investing heavily to improve its direct response advertising business. He added that the company\u2019s active advertisers were up 20% year-over-year.\n <\/p>\n

\n And Brody says those investments should enable the platform to better capitalize on its user base.\n <\/p>\n

\n \u201cAt the end of the day, digital advertising is built on reach and engagement, and we have been growing both steadily,\u201d he said. \u201cIt\u2019s been a transition year for us in terms of really rebuilding a lot of the foundational pieces of our ad platform and we\u2019re seeing some really promising signs there. And these ad platforms improvements will allow us to truly capitalize on this opportunity \u2026 in the future.\u201d\n <\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

When Snapchat announced last month that it had reached 5 million paying subscribers for its Snapchat+ service, it seemed like a stunning achievement. The milestone marked the halfway point to the 10 million subscriber number that CEO Evan Spiegel had just months earlier identified as a \u201cmedium-term\u201d goal. The service\u2019s success in just 15 months […]<\/p>\n","protected":false},"author":1,"featured_media":31891,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[23],"tags":[],"class_list":{"0":"post-31890","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business"},"yoast_head":"\nSnapchat isn\u2019t just for teens anymore. 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