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Business Operations Business Models

How Does Snapchat Make Money (Business and Revenue Model)

The Snapchat business model

How Does Snapchat Make Money?
Here’s what you should know:
  • What is Snapchat, and how does Snapchat work?
  • How does Snapchat make money?
  • Advertising
  • Spectacles by Snapchat
  • Geofilters
  • Snapchat’s Subsidiaries, Acquisitions, and Exits
  • Snapchat’s profit and revenue
  • What is the Snapchat business and revenue model?
  • Snapchat’s funding and market cap

How does Snapchat make money if it’s free? Here is a full, in-depth, breakdown of their three (3) revenue streams and the different products and services they offer, as well as the Snapchat business model, their year-over-year revenue, and how Snapchat works.

What is Snapchat, and how does Snapchat work?

Snapchat is an instant messaging app that allows users to send pictures and messages that are only available for other users to view for short periods of time only.

Founded in 2011 by Evan SpiegelBobby Murphy, and Reggie Brown, Snapchat now has more than 293 million daily active users on its platform.

How Snapchat works is: Once a user downloads the app, creates an account, and sets a username – they can begin adding friends, sending snaps, posting stories, and playing online games.

Some of Snapchat’s competitors include Instagram, TwitterPinterestFacebook, LinkedIn, and other social media platforms.

Snapchat App in Apple App Store | Snapchat Business Model | How Does Snapchat Make Money?
Source: Apple App Store

How does Snapchat make money?

According to page 26 of Snapchat’s Q2 2021 Form 10-Q, Snapchat has more than 293 million daily active users. So how does Snapchat make money off of all these users?

Below is a breakdown of how much money Snapchat makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 3 ways of how Snapchat makes money (in 2021):

Snapchat has a revenue model that makes money in three (3) ways – advertising, selling Spectacles by Snapchat, and Geofilters.

#1. Advertising

Snapchat makes money through its advertising by offering ad placements on its app to advertisers. In fact, according to Snapchat, 99% of Snapchat’s total revenue was generated through advertising in 2020.

This is done through AR Ads and Snap Ads. AR Ads are seen through sponsored lenses or filters and can be seen in 3D. While Snap Ads allow advertisers to choose from a multitude of ad options such as video ads, story ads, collection ads, dynamic ads, and commercials.

According to page 25 of Snapchat’s Q2 2021 Form 10-Q, the average revenue per user, or ARPU, is $3.35.

Snapchat Advertising Cost:

  • starts at $5 per day

Note: 99% of Snapchat’s total revenue was generated through advertising in 2020.

#2. Spectacles by Snapchat

Snapchat also makes money by selling physical products through its company Spectacles.

Released by Snap Inc. on November 10, 2016, Spectacles sells three (3) products: virtual reality glasses, charging case and cable (set), and a 3D Viewer.

Spectacles by Snapchat Cost:

  • the three (3) products range in cost from $15 to $380

#3. Geofilters

Another way Snapchat makes money is by selling filters that users can personalize and purchase through Snapchat.

How it works is: Customers go to Snapchat’s create a filter section of their website and (1) add a filter design, (2) set the date(s) they want the filter to run from, (3) choose the location they want their filter to be seen in, and (4) pay.

Snapchat Geofilter Cost:

  • starts at $5 per day

Snapchat’s Subsidiaries, Acquisitions, and Exits

To date, Snap Inc has made a total of 24 acquisitions, 11 investments, and 4 lead investments.

Snapchat Acquisitions
Source: Crunchbase

Snapchat’s profit and revenue

In 2020, Snapchat reported $2.5 billion in revenue.

Note: Because Snap Inc is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Snapchat’s publicly released financial reports, including annual reports, through Snapchat’s investor section on their website.

What is the Snapchat business and revenue model?

Snapchat makes money through a few revenue models that they combine within their company, they are:

  • Advertising business model
  • Transaction based business model
  • Mergers & acquisitions (M&A) business model

Snapchat’s funding and market cap

According to Snapchat’s Crunchbase profile, Snapchat has raised $4.9 billion over 13 rounds and has a market cap of $122.39 billion as of August 2021.