I’m Making Ugly Faces, Snapchat is Making Money

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Snapchat, (or should I say Snap Inc.?) is currently in the midst of preparing for an initial public offering which is projected to be at a valuation of $25 billion or more. In context, that’s larger than both Twitter’s and Facebook’s initial IPOs from a few years back. Ironically, there is good money to be found on a platform that deletes all your digital content (in my case, really ugly selfies of myself with witty captions) after 24 hours. Despite this, 70% of 18-24 year olds already use Snapchat and this impressive stat is likely to continue to rise; the same can not be said for other competitors. So how has Snapchat gotten so big and why is it worth so much? Let’s break it down.

What is Snapchat?

If you’re not familiar, Snapchat is essentially a social media app that lets users send pictures and short videos with the option to send these “snaps” to either specific friends or all of them. These snaps can be further customized with stickers, doodles, geo-filters, and even selfie lenses — the flower crown and puppy filters are particularly popular. The catch is that these snaps suddenly disappear after 24 hours, unless someone takes a screenshot of course. This disappearing act is perhaps, I would argue, the largest appeal for users. There is no pressure to get the perfect picture to share on Instagram, or neatly condense one’s thoughts into a 140 character tweet. Snapchat is not focused on likes, it’s focused on the now, offering small, but instant glimpses into one’s life. With this in mind, we are often willing to share more with the comfort of knowing that it will all be gone by tomorrow.

Let’s say for example, your friend is attending a concert — could be Adele, Beyonce’s Formation Tour, Kanye’s Saint Pablo Tour, whatever floats their boat. You might see a tweet about how the show is going, there may be a picture on Instagram the next day featuring your friend’s concert outfit with the stage illuminated in the background, you might even see a photo album of the concert on Facebook two weeks later. But what platform will make me regret spending all of my money on sushi everyday of the week instead of saving up for that concert? Probably Snapchat. While I am sinking into my bed, I can practically watch in real time, the music, the choreography, even the emotional high notes; all from my friend’s Snapchat Story. It’s authentic, unfiltered, and instant.

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Celebrities use Snapchat to share with their fans behind-the-scene moments that are personal and intimate

Perhaps this is why Snapchat has amassed such a huge audience. The platform encourages users to create content freely without worrying about likes, which you can send to as little or many friends you like. As Snapchat has become increasingly popular, how do advertisers fit into this scenario?

 

The Geofilter Business

How do you monetize a business that revolves around a smartphone camera? One of the answers is the combination of GPS and customized filters. It’s that simple. With On-Demand Snapchat Geofilters, businesses are able to create and submit their own custom geofilters that Snapchat users will be able to access if they are within the designated area. This is perhaps most effective for running special events or campaigns with the goal of increasing general awareness and engagement. Films like the recent Terminator have used Snapchat geofilters on a wide-scale to build up anticipation leading up to the release of the movie. Even schools like Boston College have a variety of geofilters for students to play around with. Snapchat charges the prices based on how long these geofilters run and for how much area they cover. Due to how popular and ever-constant, these geofilters are, it’s pretty safe to say that Snapchat is making quite a bit of money.

Discover

Launched in January 2015, the Discover feature on Snapchat allows publishers to reach audiences with their own video editorial content. Partnering with media giants such as CNN, Buzzzfeed, ESPN, MTV, People, etc. and ranging from topics such as food and gaming, to fashion and politics and everything in between, there is instantly available content for any type of user. In this age of cord-cutting, more and more people are even turning to Snapchat’s coverage of events such as college football and music award shows as opposed to traditional television. Snapchat is able to generate a stable income as more and more publishers see the value of placing their content on the platform.

Snap Ads

In between reading articles like “21 Increadible Animals With Real Superpowers” and watching your friend’s attempt to do a cartwheel while drunk at the tailgate yesterday, you may also run into some more traditional-looking advertisements. Luckily, you are able to quickly interact with these ads, whether it is a quick tap on the screen to skip, or a swipe up to interact with an advertiser’s mobile website. Effective ad integration has made Snapchat’s swipe up rate to be more than 5x higher than the average click through rate on other social media sites.

With more than 10 billion video views daily, there seems to be no slowing down for Snapchat. Tell me about your experience with Snapchat in the comments below!

 

8 comments

  1. kdphilippi18 · ·

    Great job highlighting Snapchat’s place in the social media world and why it has been so successful. Your comment that Snapchat is “authentic, unfiltered, and instant” describes it perfectly. It was interesting to learn more about the different ways Snapchat is monetizing its business. I love geofilters and definitely get annoyed when I’m out and there aren’t fun options in different locations. It is crazy to think how quickly they have become part of our lives. I think advertising on Snapchat through geofilters and snap ads have been so successful because brands are able to creatively integrate into the snapchat platform without disturbing the users experience. It will be interesting to see if Snapchat continues this type of advertising or if their IPO will force them to change this experience to appease advertisers.

  2. finkbecca · ·

    Your breakdown of Snapchat and what is has to offer was really great. I think the way Snapchat does advertising is really great, the ability to skip quickly or swipe up and get more info quickly. Most of the time, I want to skip the ads, so one click to get away is great. People will swipe up if you intrigue them and I have definitely been pulled into some advertisements on Snapchat before. I have definitely looked at more advertisements on Snapchat than Twitter, probably because of the video content and companies are usually a little more fun on Snapchat than the 140 character tweet on Twitter.

  3. Snap Inc. IPO will be very interesting to monitor over the short-run. I say this because a large amount of the users are millennials. You have the stat saying “70% are 18-24 year olds”. As millennials age, I believe their usage of Snapchat will decrease. I believe Snap inc. will have to continue innovating and rebranding themselves to continue attracting new users. I am eager to see how Snapchat performs because now their main driver will be making short-term profits. This may hurt the companies attempts to innovate. Otherwise, good post analyzing how Snap inc. monetizes their business.

  4. Nice post. You might have been able to skip the “if you don’t know what snapchat is” section, but the rest provides some nice background information.

  5. adamsmea89 · ·

    This was a great summary of how Snapchat works! I agree with you, that the success integration of advertisements has really pushed Snapchat above and beyond its competitors. They have managed to do this in a way that does not annoy the user, which seems to be half the battle. I am curious to see if Snapchat can withstand the test of time because they will need to work at evolving the app very quickly in order for its users to stay interested. So far they have done a great job, but I wonder how much more Snapchat can really do. With all of the other social media platforms focusing more on live content / streaming I wonder if Snapchat will get left behind.

  6. Great post about all the features snapchat has to offer! I love the features about advertising in this post as I find it so interesting how many companies are trying to jump onto this snapchat game for their marketing. It will interesting to see how else snapchat will try to monetize their platform

  7. copmania12 · ·

    Awesome post, I really enjoyed reading it! I think snapchat’s approach to making money is really successful. I don’t know if you have ever tried to create your own geo-filter, but they are pretty pricey depending on the span of your location and the amount of time you want it to sustain. There was a birthday recently for a girl who lives down the street from me on Gerald, and for her birthday her brothers both bought her a geo-filter for the day on snap chat. It is definitely a platform that initially I thought would be a short-lived social media craze, but with the way they are innovating snap chat seems to be here to stay!

  8. jagpalsingh03 · ·

    Really good post! It’s crazy to see how much Snapchat has progressed! Once just an app to send pictures to your friends is now a way to connect with celebrities, companies, and build your brand. Despite this crazy progression, I think Snapchat has done a good job of making the change feel natural. The geofilter advertisements don’t feel forced upon you and the sponsored facial filters are up to par with the non-sponsored ones. I also would have never thought I would be reading articles on Snapchat but I’ll usually skim through 1-2 Buzzfeed-esque articles a day. While the video player for the articles is annoying to use, overall, Snapchat has done a great job of monetizing of their app.

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