How does Snapchat make money?

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How exactly do disappearing photos and 10 second videos allow Snapchat to remain afloat? As discussed in Snapchat’s rise to fame and glory, Evan Spiegel’s 5 year old app was projected to earn $100 million in revenue annually. Mystified? You’re not the only one. Having shakily introduced ads to the app in 2014 and rejected both Facebook and Google’s acquisition offers, Snapchat has surpassed expectations, reaching 7 billion daily views in January 2016.

The ‘law’ for snapchat is, if you’re born before the 1990s, you’re too old. Period. Snapchat’s audience base is mainly high school and college students – it may seem intuitive seeing the quirky features and confusing layout, but herein lies Snapchat’s revenue stream. These 13 to 23 year olds are helping Snapchat make the big bucks.

Live Stories ($100,000 per day)

How do you stay up to date with news? If you answered websites or TV, be prepared to be laughed at by high school students. Live Stories or just “Live” is how the next generation are watching news. From UFC matches to Australia Day celebrations and the Oscars, Snapchat’s dedicated team of 100 content editors manage the stories that appear on live stories. The collection of 10 second long videos that make up a ‘story’ feature A-list celebrities, politicians and everyday users ‘snapchating’ away at ground 0 – right at the heart of the event. There is no news reporter – just quirky, colourful filters and an army of Snapchat users to broadcast the entire news story.  Adweek reports that a live story can cost up to 750k for a single day!

Discover

This is a little like Live Stories except these spots are mainly bought by media companies. Firms include National Geographic, Cosmopolitan, BuzzFeed, CNN, Fox Sports and Vice – a colourful blend between old and new. Discover features, short news stories, celebrity gossip and mainly fun, casual news feed material. Rates begin at $20 for thousand views.

Publicity

Earlier this year, big name companies such as PepsiCo, Amazon.com and Marriott International paid $1 million each to appear in Snapchat’s Super Bowl (America’s most popular football event) advertisement.

Also, utilising “Lenses” (Video filters), Gatorade snapped a deal of between $450,000 and $750,000 per day for a custom video filter that would look like someone was dumping a bucket of orange Gatorade over their heads. The lens was played more than 160 million times – a major marketing success.

Filters

For the everyday, Snapchat also offers location based filters for a birthday party or a brand advertisement, starting at $5 for an 8 hour block.

You may be asking now, if the target audience of Snapchat is from the ages of 13 – 23 years old, how are other media companies that target older audiences such as CNN and National Geographic meant to get traffic? Despite this obvious mismatch in audience type, it seems older corporations are attempting to get a chip of this new social media frenzy at all costs. A particular case includes the floundering Yahoo!, which made an effort to widen its audience base in the early half of 2015. By buying a place alongside the other 20 or so ‘discover’ story feeds, Yahoo! hoped to attract a younger generation of users – only through old-school news reporting styles and news stories that would make any sleep deprived teenager snore away. Snapchat decided Yahoo! was not popular enough to remain on the exclusive list and has since axed their campaign.

Yahoo! continues to target older audiences but hopes to improve its ratings under CEO Marissa Mayer’s strategic plans despite announcing a $4.4 billion loss in revenue and the cutting of 15% of their workforce.

Yahoo!’s was replaced by BuzzFeed, a trendier and younger media company. Jonah Peretti, the CEO of BuzzFeed claimed that 21 percent of his company’s overall audience came from Snapchat – a figure surpassed only by Facebook and its own website and apps. This goes to show the highly age exclusive audience that Snapchat exploits for its revenue from – any advertiser targeting outside the “teenage to early adult” range is just knocking at the wrong door.

In fact, since Snapchat has grown so much in the last couple of months, corporations and firms are not the only ones exploiting this social media frenzy. Major sporting associations – such as Major League Baseball (MLB – America’s major baseball league) has begun incorporating the Snapchat logo into all their team logos to promote Snapchat user followings. Professional players get air time in the 10 second snaps of their team’s stories increasing player to fan communication and thus produce a more personal connection between follower and club.

Celebrities have also taken to Snapchat. With big names such as Kylie Jenner and DJ Khaled reaching 10 million followers and around 3.5 million daily views each, not only do large corporations pay these individuals for pricey 10 second product placements, but it’s also become a platform for the already popular to become even more popular. As each photo and each video feels like a traditional, intimate mobile text between two people, the app allow fans to feel closer to their idols. Snapchat has really taken off from its infamous roots as a sexting platform to a wide-reaching tool for communication, promotions or just keeping up to date.

Despite initial controversy and doubt in its potentials, Spiegel really has had the last laugh. Proving that it’s so much more than a ‘fun’ app, Snapchat is thriving off the new generation of mobile users. As large corporations come to understand the importance of becoming trendier, more quirky and more popular amongst the next generation, the market for digital media and marketing has reached unprecedented levels.

Snapchat represents this gateway between old and new media. With so much on offer, 10 second videos aren’t the only things it will be snapping up.

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