How does Snapchat make money?

October 21, 2014
App Development,Tech News

How does Snapchat make money?

Snapchat cashing in

I can’t count the amount of times this question is asked. Not just with Snapchat though, any free application. It’s a relevant question however. I mean, so few understand how Snapchat now has a $10 billion dollar valuation from doing nothing but allowing us to send 10 second images. A good guess might be that the United States Government commission them to provide their fantastic service to make people super duper happy.. or not!

So how does Snapchat make money?

It doesn’t! Or at least not until the coming weekend. What you have to understand is that when something, anything, has popularity, it is of value. Investors are throwing hundreds of millions of dollars at Snapchat with hope that when the firm does decide to ‘monitise’, they get huge financial returns.

Ways Snapchat could make money

  1. Charging for the app
  2. In app purchases (IAP)
  3. Advertising 3rd parties

Let’s be honest, charging for Snapchat is never going to happen. They could at this point do this though. Think about it, there are so many people using the application that not buying into its service would mean you would be the ones left out – not Snapchat.

IAP is a technique which many of the game development firms use to bring in money. ‘Clash of the Clans’ is a perfect example. The app itself is free; however to progress faster, to have any real chance, a user must buy small bolt-ons. Only $0.79, why not? Not exactly going to break the bank. Addiction kicks in, and before you know it, the ‘free’ app has taken a nice 20 dollars from you. How many apps have you paid $20 for!? Snapchat could have possibly offered the option to replay a snap twice rather than once from a minimal fee.

Advertising is the route they have taken. It’s the main money generator for all the world’s major internet firms, including Facebook, Twitter and Google. 3rd parties pay a fee to place their product advertisements on your popular service in the hope users are attracted and buy. A great example of this would be our own games. You open Wall Street Race, download an add, and open it from your phone, and Viper Apps take home up to $5.00 for every single hit. That’s right! We make money this way too.

Snapchat Announcement

As of this weekend, Snapchat have announced that advertisements will now appear within the app. Don’t get annoyed yet! They have been incredibly noble about their intentions. Rather than throwing advertisements down our throats much like YouTube do, before users can watch a video clip, they choose to open ads. The ads will appear in the users section of the app (recent updates) and will disappear entirely after 24 hours.

Our Thoughts

We think this is a damn good deal. And a smart decision. The company has been frank that every business has to make money, yet has said ‘we care about our users’. To be honest, it is very unlikely this set-up will last more than a year before they understand people just won’t open advertisements – I mean when do you actively read ads for pleasure other than reading GQ magazine

Enjoy it while you can, because the annoying advertisements are coming whether we like it or not!

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