Snapchat explores ways to monetize and add new features

At the TechCrunch Disrupt conference on September 9, 2013, Snapchat CEO Evan Spiegel announced that Snapchat users share an average of 350 million self-destructing messages a day. This figure is up from an average of 150 million daily photos shares in April, representing 483% growth in just over six months.[1] Snapchat’s viral growth enabled the company to secure $60 million dollars of venture capital funding at an $800 million valuation, despite lacking any revenue streams. At the conference Even Spiegel discussed ways the company is looking to monetize and hinted at product updates to come.

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Shortly after Snapchat announced that it had raised $60 million in funding in late June, the company suggested that the first phase of its monetization strategy would involve in-app transactions. Spiegel told TechCrunch that the company had already begun exploring in app-features to see what worked best: “In-app transactions will come first,” said Spiegel. “We think we can build really cool stuff people want to pay for. The app is now a part of everyone’s day-to-day lives. That means that they will — I at least would — pay for a more unique experience.”[2]

However, at the Disrupt conference earlier this month, Spiegel said that the company’s monetization strategy had shifted more towards native advertising. Spiegel said that they way the company thinks “about monetization has changed” and hinted that the company was moving its focus away from in app purchases.[3]  Spiegel noted that the company is seriously considering adding a news feed feature that would provide for multiple advertising revenue streams. Snapchat is currently the only widely used social app that doesn’t have a news feed. TechCrunch described what a potential news feed for Snapchat would look like. The blog suggested that a good way to envision it would be to think about your instagram feed if all the photos had to be uploaded in real time and expired after a certain increment of time. Anyone could like or comment on your pictures/videos but these comments and likes would expire when the uploaded picture self-destructs. TechCrunch further suggested that comments could be restricted to pictures or videos in order to keep in line with Snapchat’s theme of visual interactions.[4]

Spiegel also said that when it comes to advertising the company would prefer to work with smaller companies and start-ups instead of big brands and retailers: “We’re really interested in supporting those without strong marketing teams.”[5] Spiegel remained vague when asked when the company should expect to generate revenue and stated that its difficult to say but hopefully before the next round of financing.[6]

At the conference Spiegel also discussed wearable technology and noted that the company will “continue to explore a wide variety of products.”[7] Snapchat recently released Snapchat Micro, an app designed specifically for the Samsung Galaxy Gear smartwatch. The Snapchat Micro app automatically links to the Galaxy note and after users to take a picture on their watch the image is sent to their smartphone so that they can add a caption or drawing. Spiegel said that the micro app was designed as part of the company’s strategy to constantly look “at ways to reduce the time between our experience of a moment and our ability to share it.”[8]

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Spiegel also said that the company is not working on or considering creating an app for Google glass. He suggested that Google should put a recording dot on glass so that people know when they are being recoded and said that the product, as it currently stands, is “invasive” and can feel like a “gun pointed at you.”[9] These comments fall in line with Snapchat’s central mission of protecting users privacy.

When questioned about Facebook’s attempt to duplicate Snapchat with the Poke app, Spiegel boasted about the company’s resilience: “It’s certainly scary when a giant enters your space,” he said. “We now talk about it as the greatest Christmas present we ever got.”[10]  Data for active users on both apps has shown that Snapchat actually grew in market share from when P aoke was launched in December of 2012 to January of 2013 before leveling off in February.[11] Spiegel also noted that while he’s talked to Facebook CEO Mark Zuckerberg, the company has had “no formal acquisition offers.”[12]


7 comments

  1. Cool post, Brendan! Snapchat like so many other recent, “game”-type apps has received rapid adoption…remember Word with Friends and Draw Something. But it seems like most of these apps see these rapid adoption, but then those rates and user engagement drops off. It seems like most of these apps follow the same pattern.

    1. Release something cool
    2. Gain a huge user base
    3. Throw in ads to begin recouping their investment and start making money

    I find it odd that these apps always jump to advertising in their app, rather than think about repurposing their technology. For example, think of how many companies or applications would love to have the technology that Snapchat is using to “self-destruct” messages. “Would you like to securely reset your password?”…Use the Snapchat technology to send a temporary password that self destructs. I think ads can work, but there may be ways to monetize that they have not even thought of yet.

    1. I think that’s a great idea Bill. I couldn’t agree more about exploring other revenue streams. Snapchat has developed an interesting technology and your idea of white labeling it for other purposes sounds very promising.

  2. I think the talk of new features like the news feed is very interesting because it is unclear as to whether they will change Snapchat for better or for worse. On the first day of class we discussed how Snapchat’s popularity is rooted in its simplicity. The news feed can certainly make Snapchat even more popular, especially considering how accustomed we have come to news feeds in social media. On the other hand, adding more to Snapchat will certainly complicate the app and possibly make it lose its appeal. I guess only time will tell!

  3. This is a very interesting blogpost. And I agree, Michelle, that it is unclear what the impact of new features on Snapchat will be. It seems that every year there’s a new buzz about a specific type of “most popular” social media, from Facebook to Twitter to Snapchat. And what we have seen from years of development from Twitter, Facebook, Pinterest, MySpace, Google+, etc, people seem to go through a phase and lose interest in their favorite type of social media.
    Many people are fed up with Facebook, but they were able to continue to develop the site with the addition of multiple features and the ability to generate multiple revenue streams through ads, popular games like Farmville, and more. In the spring of 2010, Facebook was the most visited website in the world, surpassing Google. Although they are still number 2 to Google, if they did not have any developments, I do not believe they would be where they are today. It is exciting where Spiegel will take Snapchat; they were valued at $860M in July, and who knows how much a year from now

  4. Snapchat is completely fascinating. What will they think of next? Thanks for bringing to light some of the features of the app. Have you tried it? I’m still trying to figure it out and if it will stay separate from the other sites or continue on.

    I find it fascinating that they seem to be so against integrating or creating special features devoted to the Google Glass. It seems like a great opportunity for cooptition. If Google Glass is going to be all about the images and videos, why wouldn’t they figure out a way to be part of it?

  5. Very informative post. I also agree that they will have to change their current format in order to generate any real revenue. In an age of increased scrutiny from regulators and having to store more documentation to CYA, I think the negatives outweigh the positives for Snapchat to provide significant value to business while still playing by the rules. I wonder how long until we see an insider trading scandal as a result of someone Snapchatting information?

  6. I agree with Michelle that adding new features such as the news feed could make Snapchat lose its appeal. I’m skeptical of a news feed for Snapchat, because the whole point of the app is for photos and videos to self-destruct after ten seconds or less. The only way to interact with that content is by replying to it with another photo or video that also self-destructs. Furthermore, the core user base — vain teenagers and college students — of Snapchat would not respond well to changes in the app, especially ones that involve ads. I think Spiegel very well knows that, and taking it in a different direction would probably cause Snapchat itself to self-destruct.

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