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

By Queenie Wong Los Angeles Times Snapchat an app whose disappearing messages and silly face filters made chatting with loved ones more casual is close to a milestone that sparse social media platforms achieve reaching billion monthly users Related Articles Boar s Head among cheese brands in listeria recall from Walmart Target others Shoppers are underwhelmed by deals and crowds on Black Friday Eel populations are falling and new protections were defeated Japan and the US opposed them Photos capture enduring enthusiasm for Black Friday the biggest shopping day of the year US stocks rise for a fifth straight day to close out a volatile month But Snap the Santa Monica company behind the app faces a crucial test The -year-old tech company is still losing money and has seen its share price tumble as it barrels forward to popularize augmented reality glasses next year And even though more people in progressing countries are using the app Snapchat usage in markets where the company makes more revenue per user including the United States and Europe has dropped Snapchat has million monthly progressing users globally according to the company Advancement in India where TikTok is banned and Pakistan have fueled Snapchat s global user advance facts from sphere intelligence firm Sensor Tower show In India Snapchat monthly users have surpassed million making up more than a quarter of its user base according to numbers Snap distributed in July At the same time in the third quarter Snapchat monthly evolving users declined by in the U S and double digits in France Italy Germany and the United Kingdom Sensor Tower explained Snap Chief Executive Evan Spiegel wrote in a September note to employees the company is in a crucible moment comparing it to a middle child wedged between larger tech giants and smaller rivals This moment isn t just about survival Spiegel wrote in the note It s about proving that a different way of building instrument one that deepens friendships and inspires creativity can succeed in a world that often rewards the opposite The -year-old tech executive co-founded Snapchat initially known as Picaboo in with friends as part of a class project while attending Stanford University Back then texts and photos posted on social media such as Facebook and Instagram were more permanent Snapchat s logo is a ghost and the app distinguished itself from its competitors by giving people a way to share photos and messages that disappeared once someone viewed it Instead of a social media app that opens to a feed of content Snapchat opens to a camera Rather than worry about whether they looked perfect people leaned into quirky and creative options to express themselves They overlaid effects onto their selfies transforming their faces into cute dogs and even puking rainbows The app encouraged people to keep sending these disappearing messages known as Snaps to their loved ones at least once a day keeping what s known as a streak alive As Snapchat s popularity soared fueling the rise of vertical videos bigger social media rivals took notice Snapchat s co-founders turned down Facebook s multibillion-dollar offer to buy the company Facebook and its photo-sharing app Instagram copied Snapchat s signature features including Stories which allowed people to post images and videos that vanish after hours This prompted particular Snapchat users to flock to its rival Instagram Spiegel jokingly titled himself as the vice president of product at Meta Facebook s parent company on LinkedIn a nod to the social media giant s cloning of Snapchat s features Although Snapchat set itself apart from other social media it also faced similar concerns tech platforms grappled with such as child safety and mental robustness The app is popular among teenagers prompting certain users to question if they re too old for Snapchat and should leave Investor confidence in the company has plummeted In Snap s stock peaked at more than per share Snap s share price closed Tuesday at Competing with larger rivals such as Instagram Facebook YouTube and TikTok for ad dollars has been challenging for Snapchat and it has struggled to consistently turn a profit Apple s privacy feature made it tougher for advertisers to track users across apps and websites posing an extra hurdle for social networks Research firm eMarketer estimates that in Snapchat will claim of U S social infrastructure ad spending but announced that share is dropping Snapchat s initial focus on disappearing messages made it tougher for the company to rope in advertisers because people typically don t want to see ads in the middle of a private conversation But the company has been updating its ad tools and expanded the places where ads are shown including between short videos Although Snapchat is popular among Gen Z and millennials its audience might limit what businesses want to advertise on its platform It definitely skews a lot younger and that naturally sort of limits advertiser interests in its audience announced Max Willens a senior analyst at eMarketer If a business wants to advertise retirement planning for example they would seemingly go to Facebook instead of Snapchat On Snapchat advertisers have also used augmented reality effects to promote their brands in quirky methods to a young audience Snapchat users can transform themselves into a dancing McDonald s McRib sandwich or snap selfies with digital animals from the Disney film Zootopia Snap has been looking at other means to make money The company offers subscription plans so users can customize the app s wallpaper personalize their digital avatars known as Bitmojis and see how often their friends view their content It started to limit the amount of free storage it offers to gigabytes AI company Perplexity announced it will pay Snap million over one year so users can find answers from its AI-powered answer engine In the third quarter Snap revenue reached billion up compared with the same period last year The company narrowed its net loss to million versus a net loss of million during the year-earlier period This month JP Morgan analysts raised Snap s price target to after the Perplexity deal but kept an underweight rating on the shares meaning they expect the stock to underperform The firm reported Snap has a sizable region opportunity an engaged user base and a solid track record of innovation but it s also looking for more consistent execution improved user revenue trends greater profitability Snap has made bold and expensive bets on the future of computing by releasing a drone and glasses to capture photos and videos though those products flopped Now Snap plans to release augmented reality glasses in that let people interact with digital images overlaid onto the physical world Instead of taking out your phone people will be able to review documents stream movies play chess and more through glasses For now analysts say it s too early to tell if Snap s bets will pay off or the company will end up in the social media graveyard like Myspace or Vine There s nothing written down that says you just get to be around forever if you re a social media platform Willens commented Although almost all of those still kind of trudge along in a few state or another Los Angeles Times Visit at latimes com Distributed by Tribune Content Agency LLC