How Does Snapchat Make Money?

How Does Snapchat Make Money Explained

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How Does Snapchat Make Money? A Quick Overview For Marketers

As Snapchat prepares for its IPO and its user base continues to grow, the 5-year old mobile app has rolled out a steady stream of new features intended to appeal to both users and advertisers. These innovations have paved the road to monetization—latest estimates have Snapchat earning close to $1B in revenue next year.

With their IPO looming and user growth continuing to skyrocket, Snapchat now has to build upon and continue to refine how they monetize. How has Snapchat charted its own course to making money? Snapchat’s various video ads and other native advertising have been the primary revenue drivers to-date. With this unique set of advertising options, Snapchat has already gained significant traction with marketers.

Snapchat Monetization Overview

CEO Evan Spiegel has recently described the business as being comprised of three parts: Camera, Content, and Communication. Snapchat has undoubtedly prioritized the first two areas with app features like Geofilters, Lenses, Snap Ads, and Snap to Unlock ads.  Communications, on the other hand, is still uncharted territory when it comes to Snapchat monetization.

Related Post: A Glossary Of Snapchat Terms, Definitions, Features, & Examples

In the following, we’ll provide more detail on each of these three, including a concise rate card (see below) and how key app features have been designed and modified to accommodate advertisers’ needs.  

Snapchat Makes Money from “Camera-Related” Features

Snapchat has invested in two app features that augment the capture and processing of images:

1. Geofilters are graphic overlays available for both pictures and videos and are activated when users are in certain geofenced locations. These overlays will typically convey something specific about the where and when of a Snap (usually an event or location).

How Snapchat Makes Money Geofilters

Samsung, Spotify, and GW2-Sponsored Geofilters at SXSW via Adweek

Geofilters became available to advertisers in June 2015 when marketers were able to provide users with unique, branded filters. Later in February 2016, “On-Demand” Geofilters was released, which gave users and brands the ability to design and purchase their own Geofilters. Paid Geofilters are priced based on the square footage of the geofenced area.

2. Lenses launched in September 2015 and immediately drew an engaged audience obsessed with sharing their augmented selfies. They have been described by Snapchat as a tool to enable “play time.” They’re often referred to as “filters” but are distinguished from Geofilters in that they are not geo-activated.

How Snapchat Makes Money Sponsored Lenses

The Peanuts Movie Sponsored Lens via Marketing Land

Shortly after launch came the first sponsored Lens for The Peanuts Movie. Taco Bell then ran a Sponsored Lens campaign for Cinco de Mayo that yielded 224 million views in one day. These are amongst Snapchat’s most expensive ad products, costing somewhere between $450K and $750K per day.

And finally, most recently, Spectacles represents Snapchat’s first foray into hardware. The device allows wearers to record 10-second videos that are shared directly to Snapchat. Videos are recorded in a new 115-degree format and are automatically uploaded to the app within seconds of the capture.

How Does Snapchat Make Money With Spectacles

Spectacles are available now (via “Snapbots”) and retail for $129.

Related Post: Snapchat Spectacles—A Visual Guide To Tech’s Hottest Product [Infographic]

Snapchat Also Makes Money From Video Ads

Over 10 Billion video views take place on Snapchat daily. As of May, this count surpasses both Youtube and Facebook’s.   

It should go without saying that Snapchat’s mobile video ad offering, Snap Ads, is the most popular ad product. The format can be described as vertical video that is up to 10 seconds long and that users can swipe up to view longer versions.

How Snapchat Makes Money With Snap Ads

Comcast, PS4, Google, Walmart, and Amazon Snap Ads

Pricing is on a CPM basis ($0.02 per 1K views). With over 10-20 million Snapchatters engaging with Live Stories every day, Snap Ad campaigns cost advertisers anywhere between $100K and $500K.

Snapchat also recently unveiled “Snap to Unlock” ads, which offer exclusive content to those that scan Snap codes that appear outdoors and elsewhere. Universal Pictures was among the first to experiment with this new ad product in their promotions for The Girl On the Train:

How Snapchat Makes Money Snap To Unlock Ads

In January 2015, the launch of Discover provided advertisers the opportunity to include their ads in a publication’s daily story. It has since been one of the most scrutinized features of Snapchat. It has undergone a number of iterations since launch, including a change in the way ads were sold. Advertisers have the option of purchasing full takeovers of daily stories. Given that Discover content is highly curated and trafficked, these takeovers can cost up to $250K-$500K.  

Snapchat’s video ads have become such a priority that more innovative brands have started to create ads specific to the vertical screen format.

Related Post: A Timeline of Snapchat Advertising

Snapchat Has Yet to Fully Address Communications 

One of the big unknowns still remaining is whether and how Snapchat will further enhance two-way communications within the app. The app was built for one-to-one messaging but not to the scale required for something like a corporate customer service program. While Facebook Messenger, Twitter and other platforms have rolled out features to augment customer communications, experiments on Snapchat have been few and far between.

How Snapchat Makes Money: Advertising Rate Sheet


Latest Developments On How Snapchat Will Make Money

In June, Snapchat introduced a number of new features including an ongoing list of vetted creative agency partners.  More notable was the announcement of Snapchat Partners, an API allowing access to programmatic interfaces, which should dramatically ease the road to ad buying on the platform.

And most recently, reports from a recent advertiser presentation show Snapchat is heavily pushing Snap To Unlock ads and Live Stories. The overall pitch to advertisers is that the company is committed to facilitating deeper and more meaningful connections with the audiences. To-date, this strategy seems to be working just fine.

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