Snap is on a mission to diversify its revenue streams. We are transitioning from a business model that primarily pursues advertising revenue to one that also makes money through subscriptions and ultimately hardware. So far, the company has seen some success with that strategy, according to the company’s most recent quarterly earnings report.
Snap’s revenue in the fourth quarter was $1.7 billion, up 10% year-over-year. Average revenue per user also increased slightly (from $3.44 to $3.62). The company’s net income was $45 million, up from $9 million a year earlier, according to the earnings report.
The company has also continued to generate significant revenue from Snap+, a paid subscription service that the platform launched in 2022. Subscribers to the service grew 71% year-on-year to reach 24 million.
While these numbers might seem to suggest that the company’s trajectory is heading in the right direction, the earnings report also revealed that the platform saw a slight decline in daily active users last quarter, from 477 million to 474 million. The report shows a decline in these users in North America and Europe, but a slight increase in the rest of the world.
Reuters also reported that the company expects first-quarter revenue this year to be lower than analysts’ previous estimates as advertising revenue declines due to competition from Facebook, Instagram and TikTok.
On Wednesday’s earnings call, CEO Evan Spiegel focused on the company’s new products, including its recent efforts to charge users for Memories storage, a feature that lets users save and store Snaps, and plans to launch Specs later this year. The company hasn’t released a mass-market version of its augmented reality glasses since 2019. In anticipation of that event, Snap recently announced the creation of a new subsidiary, Specs Inc., focused solely on eyewear development.
“Our long-term vision for augmented reality extends beyond smartphones to a future where computing is more natural, contextual, and seamlessly integrated into the real world,” said Spiegel. The CEO said the hardware products could appeal to “different audience segments” than the “core Snapchat audience,” adding that it was important to develop a “strong standalone brand” for Specs.
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That said, it looks like Specs’ strategy isn’t fully complete yet. Later in the conversation, Spiegel continued: “We’re so close to launch, so the key here is to make sure we get a successful launch and deliver a great product. And, as you know, I think we have a lot of flexibility to think about how we can (leverage) the product going forward.”
