How does Snapchat make money?
At first glance, the idea of messages self-destructing after a set period sounds terrible.
This is exactly what Evan Spiegel’s classmates thought when he pitched the idea behind Snapchat in 2011.
Fast forward to 2017 – Snap ( Snap Inc. ), Snapchat’s parent company, priced its initial public offering at $ 17 per share on March 1st, 2017 and the company plans to begin trading on the New York Stock Exchange on March 2nd, 2017. This will give Snap a market value of nearly $ 24 billion, making it the largest US tech IPO from Facebook.
This prompts our next question … which is the main topic of our article.
What is Snapchat?
To understand SnapChat’s success, you first need to know what the app does and how it works.
Users can exchange “snaps” or messages that may contain text, video, and photos. Private messages are automatically deleted once opened. A public post, on the other hand, has a 24-hour expiration date.
If you think these limitations are ridiculous, you should know that videos can only live up to ten seconds in length. In other words, Snapchat is a poorly designed messaging app or something else entirely. But with 150 million daily active users and an estimated $ 18 billion valuation, it’s clear this social media craze is far from badly designed.
Expiry Dates – Snapchat Point of Sale
Snapchat’s brilliance comes down to a simple philosophy: Some things are more valuable with a time limit.
Giving social content expiration dates increases the engagement factor. This is mainly because users who manage to capture snaps while they are available get a sense of exclusivity. For example, stories covering major sporting events reach a high level of engagement because sports fans love that “in-the-moment” feeling. For a PR boost, companies also feature stories that take their audience behind the scenes. Some appropriate settings include launching a new office, company outing, or charity program.
Of course, Snapchat comes bundled with other cool features. In addition to the ability to post snaps, users can also post Stories, which are curated shots that are visible to followers.
To make snaps more interesting, Snapchat also offers lenses that apply fun overlays, from frowning faces to the infamous dog face filter. These filters sometimes require user action to trigger animations such as raising an eyebrow and letting out the tongue. Overall, the lenses offer users an outlet for creativity and self-expression, which is something everyone can appreciate.
Finally, it turns out that Snapchat’s self-destructing messages are great for absolute privacy and security. In some ways, sending snaps is much better than using encrypted messaging apps if you’re concerned about privacy. Once a snap reaches its time limit, there is no way for any unauthorized party to retrieve its contents.
For all these reasons, Snapchat proves to be a very effective content distribution channel for brands looking to establish a presence in social media. It’s time for the million-dollar question …
So how does Snapchat make money?
Just like other social media platforms like Twitter, Facebook, and Instagram, Snapchat takes advantage of advertising. But thanks to its unique features, the company is making a killing.
1- Snap Ads
Snap ads are the bread and butter of SnapChat advertising. They work by showing 10 second-tier video ads, always relevant to other clicks. These ads are also interactive. Once introduced, users have the option to swipe up to access more content, be it a longer video, blog post, or app installer.
To improve conversions, the company launched SnapChat Partners with companies like 4C, SocialCode, TubeMogul, and Adaptly. Data suggests SnapChat’s advertising revenue will reach nearly $ 1 billion next year. According to eMarketer, one of the reasons behind this explosive growth is the app’s immense popularity, particularly among millennials and members of Generation Z.
Despite SnapChat’s moves to boost ad revenue, there’s one line they wouldn’t cross – ruining their users’ privacy. That’s why the company ensures that companies can’t advertise their users’ private messages.
In addition to Snap Ads, SnapChat leverages the following sources of ad revenue:
Life is more fun when you live in the moment
These are the words you will find in the description of SnapChat in the mobile app store. It’s about capturing the moment and sharing your experience with your followers.
With Geofilters , users no longer have to provide details manually. Whether it’s a shopping mall, a national event, or a famous landmark, SnapChat offers unique filters that will give context to any shot. They no longer have to explain where they are, what they are doing and why they are there. As a result, they are encouraged to quickly produce user-generated content and share it with their social circles.
For example, an overlay of fries and a hamburger will appear if the user is inside a McDonald’s facility.
How does SnapChat benefit from this feature? Please note that the company is not uploading the project to Geofilters. If you want to take advantage of an on-demand geofilter, you will need to create it yourself. However, SnapChat will charge you for two things: the size of the area and the amount of time the Geofilter is available.
To start, SnapChat charges $ 5 for 20,000 square foot coverage, which is the minimum area required for a Geofilter. This area is usually sufficient for a medium-sized office. On the other hand, the maximum purchasable area for a Geofilter is 5 million square meters, which should be enough to cover a few city blocks.
Geofilters can stay active from anywhere from an hour to a total of 30 days. In addition to large companies, individuals can also pay for temporary Geofilters on events such as birthdays and weddings.
Here are some tools and services you can explore,
Geo-Filter.com offers the easiest way to create SnapChat Geofilters. It is also a tool for creating a beautiful Geofilter. Here is the message from Danny, a representative of Geo-Filter,
Our Geo-Filter Designer allows you to easily create an awesome Geofilter that’s ready to be sent to Snapchat instantly. Geo filters are ideal for marketing materials, weddings, birthdays, small businesses, and more.
If you’re not good at designing, you can always get someone else to do it. CustomFilterz can be your solution. It highly offers custom geofilter for users. Jason Slater, the co-founder of CustomFilterz has a message to share,
For businesses that want a fully customized geofilter that people will share and fit their brand, CustomFilterz is the # 1 geofilter design agency . We also create geofilters for birthday parties, weddings, etc. “
Alternatively, you can search for professional SnapChat filters from an online marketplace. FilterPop is the marketplace for custom SnapChat filters. You can find Geofilter designs for weddings, birthdays and more. Alex Kehr, CEO of FilterPop shares his corporate mission,
We want every event and moment to be as memorable as possible. FilterPop’s marketplace connects the world’s best designers to the most innovative businesses and consumers. We help people form memories that last a lifetime.
3- Filters for sponsored goals
Realizing the appeal of lens filters to SnapChat users, large companies have gone ahead and launched their own sponsored lens filters. These lens filters are similar to Geofilters in that they can also appear only in specific locations. However, lens filters are more interactive and dynamic than stationary geofilters. To increase user immersion, lens filters also play an audio clip when active.
For example, eating at KFC also enables the Colonel Sanders lens filter, which turns users into the white colonel. A special animation also takes place involving a fried chicken leg, prompting the user to grab a bite.
Please note that sponsored geofilters and goal filters don’t just improve the customer experience.
Think about it: if you’re eating at Taco Bell’s and your head suddenly turns into a giant taco shell, the first thing you’ll want to do is share it with your friends. As a result, brands advertising on SnapChat can leverage user-generated content (UGP) and the reach of their customers’ social media to gain exposure.
Speaking of which, Taco Bell’s noble attempt to turn people’s heads into tacos was a success.
A total of 224 million people interacted with the taco head’s SnapChat filter. To be fair, brands looking to advertise using sponsored filters have to shell out up to $ 750,000. By comparison, the average cost of a 30 second ad on Super Bowl costs a whopping $ 5 million. This is without any guarantee that the public is paying attention during the commercial.
4- Find out
When using SnapChat, you may notice that swiping right twice opens the Discover feed. Here you can find curated shots from publishers like CNN, BuzzFeed, People and Cosmopolitan. There will also be some commercials between snaps, so it’s clear Discover is monetized.
While no one knows how much SnapChat the Discover feature can make, they should be making money with their bare hands, as around 20 big name publishers have partnered with the company. The feature also spread during the time SnapChat experienced significant revenue growth.
Most likely, both SnapChat and a publisher will share the ad revenue. It is unclear how much each party gets for each deal.
5- Sports partnerships
For the past few years, SnapChat has partnered with sports organizations such as the NHL, NFL, and MLB. These organizations allegedly leverage Live Stories at sporting events to reach more people in the social space.
Just like with Discover, it’s unclear how much money SnapChat makes with sports partnerships. But since the app offers a hotline to young and passionate audiences, major leagues are investing in offers that run weekly Discover channels like “MLB Wednesday.”
Take note that MLB started using SnapChat in 2014. At that time, users have to follow their account to view the stories they post. But with a partnership, Live Stories are promoted to all users.
In a previous report from AdAge.com Live Story Ads make SnapChat anywhere between $ 400,000 and $ 500,000 for full exposure to the company’s user base. In addition to major sports organizations, Live Story advertising partnerships are sought after by companies such as iHeartRadio and AEG.
The final words
In the past, people were puzzled as to why SnapChat was worth so much because its revenue model wasn’t clear. This explains the company’s moves that have affected monetization in recent years.
Today, SnapChat has a robust revenue model that caters to businesses as well as people who want to “seize the day.” For tips on integrating SnapChat with your social media marketing strategy, check out these essential rules for effective Snap Chat marketing . Let us know in the comments!