How Snapchat Became a Social Media Giant—Yet Still Struggles to Make Money

How Snapchat Became a Social Media Giant—Yet Still Struggles to Make Money

Written by Massa Medi

Snapchat commands a staggering presence in the world of social media, boasting over 450 million daily active users. Yet, despite these numbers, the company has only managed two profitable quarters in its entire lifespan—an astonishing contradiction in the world of tech giants.

With tens of billions in revenue under its belt, one might assume Snapchat would be rolling in profit. However, the reality is starkly different. While their revenue has seen steady, consistent growth year after year, the share price has taken a less favorable journey—dipping down and then moving sideways, never quite achieving the meteoric rise you might expect. All this seems even more surprising when placed beside Meta, who managed to pocket a jaw-dropping $20 billion in a single quarter.

The Origin Story: Flipping Social Media on Its Head

To understand how Snapchat became this paradoxical powerhouse, you need to journey back to 2011. At the time, social media was a very different landscape. The cultural trend leaned toward perfectly curated, almost professionally polished photos and posts. Instagram, Facebook, and other platforms focused on perfecting moments, fostering an environment where authenticity faltered under the weight of filters and photo editing.

Enter Bobby Murphy and Evan Spiegel, Snapchat's visionary founders. They peered into the saturated world of photo apps—most boasting features to make selfies prettier or enhance images—and spotted a gap. What if, they wondered, there was an app where you could share awkward selfies and funny photos without the pressure of perfection? That idea birthed Snapchat, an app aimed at capturing the full, sometimes messy, spectrum of human emotion rather than just the ‘Kodak moments’.

Ephemeral Messaging: The Snapchat Revolution

What set Snapchat apart from the rest was a simple yet groundbreaking concept: ephemeral messaging. On Snapchat, every photo or video you sent would disappear in 10 seconds or less after being viewed. This temporary format made sharing feel low-stakes—no trace, no judgment, just a fleeting fragment of everyday life.

This approach was the literal opposite of what social media stood for at the time. Instead of laboring over a post that would be public forever, users could now send whatever felt real—not what looked perfect. The pressure was off.

Snapchat's intention was clear: This was not about capturing your best moments; it was about communicating with friends in an authentic, sometimes silly, and always transient way.

Snapchat’s Game-Changing Features

Pushing beyond ephemeral messages, Snapchat rolled out a series of innovations that would go on to transform social media as we know it.

These features propelled Snapchat to the top of the App Store and Google Play charts. By 2016, they’d surpassed 100 million users, then leapt to 200 million by 2019. As of 2024, they’re sitting at a remarkable 450+ million daily active users. Revenue followed suit, almost always trending upwards—reaching $5.3 billion in 2024.

The secret? Focus on fun, informality, and “real” connection—especially with their core audience: teenagers.

But If Everything’s Going So Well, Where Are the Profits?

On the surface, Snapchat might look unstoppable—millions upon millions of engaged users, and quarterly revenue climbing. But the numbers tell a more complex story.

With the exception of a sudden, pandemic-driven spike, Snapchat’s stock has mostly remained stagnant since their IPO. Surges, like the one following their first-ever profitable quarter in Q4 2021, were brief and short-lived. “2021 was an exciting year for Snap and we made significant progress growing our business and serving our global community,” CEO Evan Spiegel remarked at the time. But the success didn’t last: after briefly making it into the green, Snapchat quickly returned to its familiar unprofitable quarters.

Demographic and Engagement Challenges

Snapchat touts its reach—saying it can engage with 90% of 13-to-24 year-olds in 25 countries. But the real concern isn’t just reaching this demographic; it’s how much time those users spend on the app. And by that metric, Snapchat is lagging far behind competitors.

Pull up the charts and the differences are glaring:

To make matters worse, Snapchat’s brand perception has tumbled among its core audience. Once considered the go-to app for teens, it now trails behind Instagram and TikTok. In 2023, 28% of teenagers called it their favorite app; in just a year, that dropped to 18%.

The “Copycat” Problem—and Eroding Competitive Advantages

If you detected some clues earlier, the root of this shift isn’t hard to locate. Snapchat’s problem? Their revolutionary features were just too tempting for competitors. Facebook, Instagram, and other giants copied every key innovation—the Stories format showed up on Instagram, Facebook, and TikTok. Facebook even made their own disappearing-message apps (Poke and Slingshot), though those fizzled out relatively quickly.

The result? Snapchat’s distinctive features were quickly commoditized. Their early-adopter advantage eroded as other apps with bigger user bases and deeper pockets deployed the same tools.

Chasing the Next Big Thing: The High Cost of Innovation

If imitation wasn’t enough, Snapchat poured billions into their most promising competitive moment: AR technology. This was more than just filters—Snapchat invested in hardware, like their “Spectacles” AR glasses (unveiled more than once, with underwhelming results). Spectacles’ first launch in 2016 ended with a $40 million write-off from unsold inventory. Their second try in 2021 also failed to gain real traction or sales.

Undeterred, CEO Evan Spiegel insists AR is the future of communication. Snapchat has even partnered with OpenAI to bring new AI tools for developers. Yet the payoff remains uncertain. And while competitors like Meta have sunk $63 billion into similar AR and “metaverse” efforts, they can afford the losses thanks to their other wildly profitable lines of business. Snapchat doesn't have those safety nets—at least, not yet.

The Monetization Conundrum

The root issue, however, goes deeper than copycats and AR investments. It's a problem embedded in the way Snapchat is used—and, crucially, how it monetizes. Like other major social media platforms, Snapchat relies heavily on advertising for revenue. But there's a snag: Snapchat's platform simply doesn't generate as many chances to show ads.

Unlike TikTok, Instagram, YouTube, or Reddit—where people spend hours scrolling through endless feeds of user-generated content—Snapchat's model is about quick interactions. Open the app, send a snap, check a few stories, and close it. The brief time spent on the app means fewer ad impressions, and thus, lower revenue potential.

Consider this: $5 billion in annual revenue certainly looks impressive. But in the same year, Meta reported $164 billion—and with far greater profitability. Snapchat’s hundreds of millions of users mean little if they aren’t seeing ads, and advertisers, seeing little opportunity, pay less for each user.

What Does the Future Hold?

After more than a decade, you might assume Snapchat would have evolved like Facebook or YouTube—growing up with its original users. But Snapchat’s core demographic (teenagers) presents unique challenges. As those early adopters age out, the novelty of features like streaks, ephemeral messaging, or live location wanes. Unlike Discord or Instagram—where users tend to stick around—many simply move on from Snapchat.

New teens still join Snapchat, sure. But this compounds another problem: advertisers want to reach people with disposable income. Teenagers generally have little buying power, making Snapchat’s average revenue per user (ARPU) much lower than competitors.

Critics might argue this is true for TikTok too—but TikTok’s time-on-app dwarfs Snapchat’s. Even with a lower ARPU, the massive engagement drives much greater total revenue.

Further complicating matters, a recent Apple policy change restricting user tracking threw a wrench into ad-based business models everywhere—but Snapchat was particularly hard-hit. Lower session lengths, a lower-spending user base, and new privacy rules have combined to severely limit growth.

Glimmers of Hope: Subscription Revenue and Improved Margins

Yet, not all is gloom. In Q4 2024, Snapchat posted its second ever profitable quarter, notching $9 million in net income on $1.5 billion in revenue (a net margin of less than 1%, but still technically in positive territory). Admittedly, the full year ended in a loss, but their margins have improved dramatically—from minus 31% in 2022 to minus 13% now.

Part of this can be attributed to a surge in interest during the debate around a potential TikTok ban as advertisers and users explored alternatives. But there’s more to it: Snapchat rolled out Snapchat+, a paid subscription offering. Within a year of its launch, Snapchat+ amassed 14 million subscribers—up from 5 million in late 2023. In a time when ad revenue is becoming less reliable, this new income source provides a much-needed lifeline.

The Road Ahead: Can Snapchat Turn the Tide?

There’s still a long way to go before Snapchat can be considered reliably profitable. But to their credit, they've maintained their independence and continued growing where many competitors have folded. Just ask BeReal—the buzzy, minimal-photo-sharing app—which was recently sold off after failing to generate any meaningful revenue.

So, will Snapchat finally break out of its “first-mover-victim” curse and translate impressive engagement into true, sustainable profits? Only time will tell. What’s clear is that their willingness to disrupt, experiment, and reimagine social media has already reshaped the Internet—but whether that translates to bottom-line success remains one of the tech world's most interesting questions.

Bonus: Keeping Your Social Media Secure

As concerns over privacy and data security grow—especially with so many platforms vying for your attention—it’s critical not to overlook your own digital safety. That's why today's article is brought to you by ProtonPass, a secure password manager designed by the same trusted team behind ProtonMail and ProtonVPN.

ProtonPass doesn't just remember your passwords—it encrypts all your digital keys, credit cards, 2FA codes, and private notes across every device. No ads, no data mining, and no meddling from Big Tech, just privacy by default. Features like "Hide My Email" let you surge ahead against spam and leaks by creating anonymous email aliases for each new signup, and tools like dark web monitoring keep your credentials safe from exposure.

If you’ve been guilty of recycling passwords, ProtonPass offers a painless, free upgrade for your digital security. Create a single master password, then let it do the rest—autofill passwords, generate strong logins, and even securely store authentication codes.

Want to learn more about the turbulent journeys of other viral apps like BeReal? Check out our next feature for a deep dive into the fast-paced world of digital trends and app survival. Until next time, I'm Hari—thanks for reading!