Snap said on Wednesday that its direct-revenue business has achieved an annualized revenue run rate of $1 billion, a milestone the company attributes largely to expansion in its Snapchat+ subscription offering. Snap's direct-revenue mix includes Snapchat+, the Memories photo and video archive feature, and in-app purchases, and the company said total subscribers across those products have exceeded 25 million.
Facing intense competition from larger platforms such as TikTok and Instagram, Snap is pushing subscription growth to supplement advertising sales, which continue to represent the bulk of the company's revenue. The move toward paid products comes as some of Snap's larger advertising clients reduce spending on smaller services, increasing the strategic importance of recurring consumer revenue.
Snap's chief executive, Evan Spiegel, had previously described the company as being in a "crucible moment" after a slowdown in quarterly revenue growth and set a goal of turning direct revenue into "a durable multi-billion-dollar growth driver for Snap." The company reiterated that emphasis as it reported the latest subscriber and run-rate figures.
In a further step to expand direct monetization, Snap said it will roll out a subscription feature that enables creators to earn recurring income from their most dedicated followers. The company will begin testing that capability on February 23 with a small group of Snapchat creators in the United States.
Snapchat+, which launched in 2022, offers users additional customization and engagement features designed to improve retention and deepen usage. Those features include the ability to pin best friends, custom chat wallpapers, and AI-powered Bitmoji Pets, which the company highlights as engagement drivers.
On the advertising side, Snap said its total active advertisers increased by 28% in the fourth quarter. Daily active users rose 5% to 474 million over the quarter, though the company also reported a decline of 3 million daily active users compared with the prior three-month period.
Separately, Snap recently unveiled Specs, an independent subsidiary focused on augmented reality smart glasses, positioning the company to compete with other firms in the wearables market. The company presented Specs as a strategic effort to expand its product footprint beyond the core app.
Summary
Snap's direct-revenue segment has reached a $1 billion annualized run rate driven by Snapchat+ and related paid services, with total subscribers above 25 million. The company is expanding creator monetization and has introduced a new AR-focused subsidiary, while advertising remains its principal revenue source amid mixed user trends.
Key points
- Direct-revenue annualized run rate reached $1 billion, led by Snapchat+ and related offerings - impacts the social media and consumer internet sectors.
- Subscriber base for paid products surpassed 25 million, signaling growth in Snap's non-advertising revenue streams - relevant to subscription and creator-economy markets.
- Snap launched a creator subscription test and established Specs for AR smart glasses, expanding into creator monetization and wearables.
Risks and uncertainties
- Competition from larger platforms such as TikTok and Instagram could limit user growth and engagement - affects social media and advertising markets.
- Advertising still comprises the majority of revenue, and reductions in ad spend by major clients could pressure overall revenue - impacts digital advertising and marketing sectors.
- Daily active users showed both a quarter-over-quarter increase and a sequential decline of 3 million, indicating volatile user metrics that could affect monetization plans - relevant to investor assessments of user-driven revenue stability.