Businessmodel of Snapchat

Customer Segments

The Snapchat app is aimed at the general smart phone user base. It has more than 100 million daily active users. The app’s automatic delete feature makes it popular among users that value privacy or wish to save memory. The platform is particularly popular among millennials.

According to Snapchat’s own statistics, users over the age of 34 account for only 14% of the apps monthly users, with 18 to 24 year olds representing the largest segment, accounting for 37% of the app’s monthly users. The US is Snapchat’s largest market, where more than 60% of smart phone users aged 13 to 34 use the Snapchat app.

Snapchat also serves a number of advertisers and brand marketers, to which it provides a range of advertising solutions.

Value Propositions

Snapchat’s initial value was based on its privacy capabilities, with the app gaining popularity because of its self-delete feature, which ensured that pictures were only accessible for a user-defined timeframe. Users also find value in the app as it is free to use and provides a broad range of personalisation and editing options, such as its collection of overlays and filters.

For advertisers, the apps’ greatest is its user base – 100 million daily active users reportedly accounting for 10 billion daily views – through which brands are able to extend their reach among their target markets.

Channels

The Snapchat platform is available as a mobile app for iOS and Android market. The Company also operates a website, accessible through mobile and desktop browsers, at www.snapchat.com which hosts further information regarding the platform and the Company.

Customer Relationships

The Snapchat app is free to download from the Apple App Store and the Google Play marketplace. Once downloaded, users are able to register for an account directly via the app, following which they are given access to Snapchat’s full functionality. The process requires no interaction with Snapchat representatives.

Snapchat is primarily community-driven, with users creating and sharing ‘stories’ and ‘snaps’. The Snapchat website also hosts a community section where users are provided with guidelines, safety tips and technical support guides. The Company keeps its customers updated with news and events via snaps sent directly to user inboxes, as well as through its blog and Twitter account.

Key Activities

Snapchat develops, operates and maintains a mobile application for messaging and photo-sharing. The app allows users to create and share multimedia messages, known as ‘snaps’. These can be photos or short videos, and can be edited to include filters and effects, text captions, and drawings. Snaps can be published as ‘stories’, a feed of chained content automatically shared with the user’s contact list of family and friends, or can be sent as private messages.

‘Snaps’ can be viewed for a user-specified length of time from one to ten seconds before they are permanently deleted. Snapchat also manages a number of partnerships with media houses and broadcast networks, which share content and user-created coverage of events.

Key Partners

Snapchat partners with a range of companies, primarily comprising media houses, broadcast networks and tech companies. As part of the application’s Discover feature, Snapchat has partnered with a number of news outlets and publishing houses to provide users with daily news updates. These partners include Daily Mail, Vice, CNN, ESPN, Cosmopolitan and Yahoo News.

The Company also collaborates with broadcast networks and events. It has a content production partnership with World Wrestling Entertainment, recently agreed a partnership with NBC and BuzzFeed to bring coverage of the upcoming 2016 Olympic Games to Snapchat, and works with Live Nation to bring coverage of live music events to Snapchat users. Snapchat has also partnered with the Tribeca Film Festival in the form of the Tribeca Snapchat Shorts program, which invites users to submit 200-second long Snapchat stories for a chance to win prizes.

Additionally, in 2014 the Company launched a partnership with payment solutions company Square to enable users to make payments via the Snapchat app.

Key Resources

Snapchat’s key resources are its software and technology, its IT infrastructure, its personnel and its user base. The Company has 17 patent applications filed with the US Patent and Trademark Office, including patents titled ‘Storage and processing of ephemeral messages’, ‘Message queues for rapid re-hosting of client devices’, ‘Device and method for photo and video capture’ and ‘Geo-location based event gallery’. Snapchat’s user base and production partners are also key as they are responsible for generating the platform’s content.

Cost Structure

Snapchat incurs costs in relation to the research and development of its app, its maintenance of IT infrastructure, and the retention of its personnel. The Company employs more than 330 workers who all represent costs in the form of salaries and benefits, and operates an office in Venice, California and an engineering centre in Seattle, which accrue fixed costs relating to rental fees and utilities.

Revenue Streams

In 2015 Snapchat recorded an annual revenue of $50 million. The Company is reportedly projecting a revenue of between $300 million and $350 million for 2016. Its principal revenue stream is advertising, in the form of native advertising solutions and media branded posts. Snapchat’s Discover media hub allows media publishers – including National Geographic, Comedy Central and CNN – to have daily content featured on the app. These customers are reportedly charged on a cost per thousand views (CPM) basis estimated at $100 CPM. If the publisher decides to use its space to publish its own advertisements, the publisher splits its profits with Snapchat.

Companies can also pay to have their brand featured in Snapchat’s Stories feed where public snaps from friends and international events are typically found. According to some reports, these branded posts can cost as much as $750,000 per day. Additionally, brands can sponsor their own location-specific geofilters and animated overlays. Snapchat’s digital advertising revenue is expected to grow following the release of the Company’s advertising API that is set to be released in the near future.