Snapchat boasts a user base exceeding 150 million daily users as well almost a $17 billion valuation. On the grounds of these statistics, it is fair to say Snapchat has more worth (on paper) than a number of famous public tech companies which could even include Twitter.
Guess you could be asking the source of investors’ confidence as they fail to question the credibility of the prospects of Snapchat ( which actually is a company with an established reputation for disappearing messages as well as humorous face filters) someday becoming a mega business. The reason obviously is that this little business it has at present clearly has a solid potential of growing up big time.
Going by the plans of the company, Snapchat is targeting about $300 million in revenue for this 2016. This is a build up from a $50 million revenue goal of 2015. Snapchat is not afraid to rant to investors it could rake up to $500 million, even up to $1 billion business next year. Well said, this is one ambitious move!
So in face of this lofty dreams of Snapchat, how do you think Snapchat will make all this money?
The very way other major internet companies like Facebook and Google earn their fortunes: it is the very Advertising!
Snapchat has a strategy of displaying ads to users in a number of vital places inside the app.
Discover: Alongside the channels produced by Snapchat’s publishing partners, you will notice advertisements.
Stories: This runs across Live Stories — just like the montages curated by Snapchat around big sporting events like the Olympics — and the one we are enjoying now is users’ stories. The implication of this is that you come across advertisements as you move from one friend’s story to another friend’s story.
Filters and lenses: In this earning medium, Snapchat makes sales of sponsored filters for particular events (if you remember Recode had recorded the purchase of one for the purpose of its annual Code Conference in 2016).
Snapchat equally sells sponsored lenses, these are the notorious face-distorting features which gives users the ability to transform into a dog or even a zombie at worst.
On the down side, one major challenge Snapchat is struggling to overturn is that it has not been excellent at measuring how well these ads are doing for its advertisers. Of course, this is one big problem. Any dude running expenses to advertise inside your app, will seriously want to have a measurement of the performance of their ads. So Snapchat is not really doing well at measuring that at present. It was only of late that Snapchat is trying to initiate partnerships with third-party measurement companies to relieve Snapchat of this distress.
So this is how Snapchat is making its millions!