We’re in the throes of earnings season. Following a common trend over the past few quarters, the news is mixed among tech giants. Meta got a bit of a respite from its storm of schadenfreude and floundering stock price. Its stock is up on promises of belt-tightening and a $40 billion Zuckerberg buyback.
Snap also had mixed news, beating EPS but missing revenue expectations. On the positive side, one nugget buried in the earnings call caught our attention: the continued ramping growth of Snapchat+. It has reached two million users, up from one million in August and zero in June (product launch).
Among other things, this ramping growth validates a market for paid social products, which have been a question mark given mixed results from players like Twitter Blue. This could also represent a beacon of hope for ad-supported tech giants like Snap that face macro headwinds and urges to diversify revenue.
Perks for Power Users
Before getting into all that, what is Snapchat+ and what does it offer? This is Snap’s premium/paid subscription tier. For $3.99 per month, it offers perks for power users including experimental and pre-release features that appeal to a certain set of Snapchat users that want to try things first.
More valuable are the deeper analytics that Snapchat+ offers. For example, users can see things like who re-watched a given story. This is proving valuable for Snapchat career influencers and brand marketers that want to optimize content output or retarget audiences. $3.99 is a small price for such insights.
Joining those baseline features, Snap recently added another tier of functionality including exclusive Bitmoji skins, access to Snapchat on the web, and above-the-fold “sticky” placement for replies on Stories. The latter lets any Snapchat+ user’s comments on others’ stories float to the top of the thread.
That last perk is notable for those who want to pay for an amplified voice on Snapchat. So within crowded message threads for a given celebrity Story (think Kardashians), some Snapchat power users and pop culture junkies may gladly hand over $3.99 per month for above-the-fold exposure.
This feature mix, combined with Snapchat+ ramping usage, is a testament to its product engineering. Indeed, Twitter Blue has not seen the same traction, which points to Snap’s well-devised product/market fit and its ability to read the room (not exactly Twitter’s forte these days).
Beacon of Hope
Back to the strategic win for Snap, ramping usage is a key point of validation for premium services. And beyond the above speculations on these features’ potential traction, a firmer ground truth lies in what the market is bearing. In other words, the demand is clearly there for Snap’s cocktail of premium perks.
The larger point is that this emboldens Snap to double down on user-pay models to supplement its core ad revenue model. And this couldn’t have come at a better time when a perfect storm of macro factors continues to generate headwinds for ad-supported businesses like Snap, Meta, and Google.
That perfect storm includes a softening economy for ad spending, privacy reform, and ensuing platform restrictions like Apple’s ATT measures. And then there’s TikTok, whose additional competition further fragments that shrinking pie of aggregate ad spend. This all screams for revenue diversification.
More importantly, Snap is looking for ways to get Wall Street excited. Its stock has tumbled over the past year, not unlike the broader tech sector. But amidst all that bloodletting, Snapchat+ could be a beacon of hope. It represents a nominal revenue boost (~$8 million), but a potential signal for much more to come.
