Snapchat is nearing 1 billion monthly users. Why can't it turn a profit?

Snapchat, an app whose disappearing messages and silly look filters made chatting with loved ones much casual, is adjacent to a milestone that fewer societal media platforms achieve: reaching 1 cardinal monthly users.

But Snap, the Santa Monica institution down the app, faces a important test. The 14-year-old tech institution is inactive losing wealth and has seen its stock terms tumble arsenic it barrels guardant to popularize augmented world glasses adjacent year.

And adjacent though much radical successful processing countries are utilizing the app, Snapchat usage successful markets wherever the institution makes much gross per user, including the United States and Europe, has dropped.

Snapchat has 943 cardinal monthly progressive users globally, according to the company.

Growth successful India, wherever TikTok is banned, and Pakistan person fueled Snapchat’s planetary idiosyncratic growth, information from marketplace quality steadfast Sensor Tower show. In India, Snapchat monthly users person surpassed 250 million, making up much than a 4th of its idiosyncratic base, according to numbers Snap released successful July.

At the aforesaid time, successful the 3rd quarter, Snapchat monthly progressive users declined by 4% successful the U.S. and treble digits successful France, Italy, Germany and the United Kingdom, Sensor Tower said.

Snap Chief Executive Evan Spiegel wrote successful a September enactment to employees the institution is successful a “crucible moment,” comparing it to a “middle child” wedged betwixt larger tech giants and smaller rivals.

“This infinitesimal isn’t conscionable astir survival,” Spiegel wrote successful the note. “It’s astir proving that a antithetic mode of gathering technology, 1 that deepens friendships and inspires creativity, tin win successful a satellite that often rewards the opposite.”

The 35-year-old tech enforcement co-founded Snapchat — initially known arsenic Picaboo — successful 2011 with friends arsenic portion of a people task portion attending Stanford University. Back then, texts and photos posted connected societal media specified arsenic Facebook and Instagram were much permanent.

Snapchat’s logo is simply a shade and the app distinguished itself from its competitors by giving radical a mode to stock photos and messages that disappeared erstwhile idiosyncratic viewed it. Instead of a societal media app that opens to a provender of content, Snapchat opens to a camera.

Rather than interest astir whether they looked perfect, radical leaned into quirky and originative ways to explicit themselves. They overlaid effects onto their selfies, transforming their faces into cute dogs and adjacent puking rainbows. The app encouraged radical to support sending these disappearing messages known arsenic “Snaps” to their loved ones astatine slightest erstwhile a day, keeping what’s known arsenic a “streak” alive.

As Snapchat’s popularity soared, fueling the emergence of vertical videos, bigger societal media rivals took notice. Snapchat’s co-founders turned down Facebook’s multibillion-dollar connection to bargain the company.

Facebook and its photo-sharing app Instagram copied Snapchat’s signature features including Stories, which allowed radical to station images and videos that vanish aft 24 hours. This prompted immoderate Snapchat users to flock to its rival Instagram. Spiegel jokingly titled himself arsenic the vice president of merchandise astatine Meta, Facebook’s genitor company, connected LinkedIn, a motion to the societal media giant’s cloning of Snapchat’s features.

Although Snapchat acceptable itself isolated from different societal media, it besides faced akin concerns tech platforms grappled with specified arsenic kid information and intelligence health. The app is fashionable among teenagers, prompting immoderate users to question if they’re excessively aged for Snapchat and should leave.

Investor assurance successful the institution has plummeted. In 2021, Snap’s banal peaked astatine much than $83 per share. Snap’s stock terms closed Tuesday astatine $7.64.

Competing with larger rivals specified arsenic Instagram, Facebook, YouTube and TikTok, for advertisement dollars has been challenging for Snapchat and it has struggled to consistently crook a profit. Apple’s privateness diagnostic made it tougher for advertisers to way users crossed apps and websites, posing an other hurdle for societal networks.

Research steadfast eMarketer estimates that successful 2025 Snapchat volition assertion 2.1% of U.S. societal web advertisement spending, but said that stock is dropping.

Snapchat’s archetypal absorption connected disappearing messages made it tougher for the institution to enactment successful advertisers due to the fact that radical typically don’t privation to spot ads successful the mediate of a backstage conversation. But the institution has been updating its advertisement tools and expanded the places wherever ads are shown, including betwixt abbreviated videos.

Although Snapchat is fashionable among Gen Z and millennials, its assemblage mightiness bounds what businesses privation to advertise connected its platform.

“It decidedly skews a batch younger and that people benignant of limits advertiser interests successful its audience,” said Max Willens, a elder expert astatine eMarketer. If a concern wants to advertise status planning, for example, they would astir apt spell to Facebook alternatively of Snapchat.

On Snapchat, advertisers person besides utilized augmented world effects to beforehand their brands successful quirky ways to a young audience. Snapchat users tin alteration themselves into a dancing McDonald’s McRib sandwich oregon drawback selfies with integer animals from the Disney movie “Zootopia 2.”

Snap has been looking astatine different ways to marque money. The institution offers subscription plans truthful users tin customize the app’s wallpaper, personalize their integer avatars known arsenic Bitmojis and spot however often their friends presumption their content. It started to bounds the magnitude of escaped retention it offers to 5 gigabytes. AI institution Perplexity said it volition wage Snap $400 cardinal implicit 1 twelvemonth truthful users tin find answers from its “AI-powered reply engine.”

In the 3rd quarter, Snap gross reached $1.5 billion, up 10% compared with the aforesaid play past year. The institution narrowed its nett nonaccomplishment to $104 million, versus a nett nonaccomplishment of $153 cardinal during the year-earlier period.

This month, JP Morgan analysts raised Snap’s terms people to $8 aft the Perplexity woody but kept an underweight standing connected the shares, meaning they expect the banal to underperform.

The steadfast said Snap has “a sizable marketplace opportunity, an engaged idiosyncratic base, and a coagulated way grounds of innovation” but it’s besides looking for “more accordant execution, improved idiosyncratic & gross trends, & greater profitability.”

Snap has made bold and costly bets connected the aboriginal of computing by releasing a drone and glasses to seizure photos and videos — though those products flopped. Now Snap plans to merchandise augmented world glasses successful 2026 that fto radical interact with integer images overlaid onto the carnal world. Instead of taking retired your phone, radical volition beryllium capable to reappraisal documents, watercourse movies, play chess and much done glasses.

For now, analysts accidental it’s excessively aboriginal to archer if Snap’s bets volition wage disconnected oregon the institution volition extremity up successful the societal media graveyard similar Myspace oregon Vine.

“There’s thing written down that says you conscionable get to beryllium astir everlastingly if you’re a societal media platform,” Willens said. “Although astir each of those inactive benignant of trudge on successful immoderate authorities oregon another.”