Snapchat’s answer to its sinking stock price is more ads

Snap back to reality…

Yesterday, Snap CEO Evan Spiegel marked the company’s 13th anniversary with a letter to employees that cut straight to the chase: Snap is struggling. The Snapchat founder addressed the company’s ongoing challenges and its share price, which has shed 45% of its value this year.

After bursting onto the public markets in 2017, Snap, Inc. promised investors exposure to what could be the next Facebook (now Meta), a company that’s currently valued at $1.3 trillion… some ~88x what Snap is worth.

Snap, like Meta, relies on advertising for the overwhelming majority of its business, some 96% of its $4.6 billion in revenue was from ads last year, a figure that barely grew relative to 2022 — not ideal for a company that is still running at a heavy loss.

Ads with friends

In a bid to grow its sales, Spiegel outlined two new experiments to get more ads in more places across the app. One change is the introduction of "Sponsored Snaps", which will now appear in the previously ad-free chat inbox. While opening these sponsored messages is optional, the move signals that no part of the Snapchat experience is off-limits when it comes to monetization. Additionally, Snap is rolling out "Promoted Places", allowing businesses to pay for greater prominence on the Snap Map — a feature people use to see what their friends are up to and keep track of their favorite spots.

When those ad dollars do roll in, they quickly get spent, as Snap continues to invest heavily in other projects such as the company's mini camera drones, Pixy, and AR glasses called Spectacles — a product the company has been developing for roughly a decade.

The good news for Snap is that its user numbers have continued to climb… although only really outside of North America recently. The app now boasts 432 million daily active users — more than double what it was five years ago.

Although impressive, much of this growth has come from outside of its most lucrative markets — the average revenue per user in the US was $7.67 in the latest quarter, more than seven times the $1.02 generated by users in its “Rest of World” region. This disparity highlights one of Snap's ongoing challenges: how to turn its growing international audience into a more profitable one. More ads might help.

Founder mode

In his letter Spiegel goes on to compare Snapchat's product strategy to the menu of fast-food chain In-N-Out Burger — with Snapping, chatting, and watching Stories apparently akin to the fast-food joint's hamburger, cheeseburger, and Double-Double. We’re not quite sure what to make of that analogy.