Snapchat, the app whose disappearing messages and silly face filters made connecting with loved ones more casual, is close to a milestone few social media platforms have achieved: reaching 1 billion monthly users.
But ClickThe Santa Monica company behind the app faces a crucial test. The 14-year-old tech company is still losing money and its share price has fallen as it seeks to popularize augmented reality glasses next year.
And while more people are using the app in developing countries, Snapchat usage has declined in markets where the company generates more revenue per user, including the U.S. and Europe.
According to the company, Snapchat has 943 million monthly active users worldwide.
Growth in India, where TikTok banned, and Pakistan has fueled Snapchat's global user growth, data from analytics firm Sensor Tower shows. Snapchat has surpassed 250 million monthly users in India, accounting for more than a quarter of its user base, according to Snap data released in July.
Meanwhile, Snapchat's monthly active users fell 4% in the US in the third quarter and by double digits in France, Italy, Germany and the UK, Sensor Tower said.
Snap CEO Evan Spiegel wrote in a September memo to employees that the company is in a “challenging moment,” likening it to a “middle child” sandwiched between larger tech giants and smaller competitors.
“This moment is not just about survival,” Spiegel wrote in the note. “It's about proving that a different way of creating technology, one that deepens friendship and inspires creativity, can succeed in a world that often rewards the opposite.”
The 35-year-old tech executive co-founded Snapchat—originally known as Picaboo—in 2011 with friends as part of a class project while attending Stanford University. At that time, texts and photos posted on social networks such as Facebook and Instagram were more constant.
Snapchat's logo is a ghost, and the app differed from its competitors by giving people the ability to share photos and messages that disappeared as soon as someone viewed them. Instead of a social media app opening a content feed, Snapchat opens up to the camera.
Instead of worrying about whether they looked perfect, people leaned toward unusual and creative ways of expressing themselves. They added effects to their selfies, turning their faces into cute dogs and even vomiting rainbows. The app encouraged people to continue sending these disappearing messages, known as “Snaps,” to their loved ones at least once a day, maintaining what it called a “streak.”
As Snapchat grew in popularity, fueling the rise of vertical videos, larger social media competitors took notice. Snapchat's co-founders rejected 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 disappeared after 24 hours. This has prompted some Snapchat users to switch to its competitor Instagram. Spiegel jokingly identified himself as vice president of product at Facebook's parent company Meta on LinkedIn, hinting at the social media giant's cloning of Snapchat features.
While Snapchat stands out among other social media platforms, it also faces similar issues that tech platforms face, such as child safety and mental health. The app is popular among teenagers, leading some users to wonder if they're too old for Snapchat and should move on.
Investor confidence in the company has plummeted. In 2021, Snap stock peaked at over $83 per share. Snap's stock price closed Tuesday at $7.64.
Competing with larger rivals like Instagram, Facebook, YouTube and TikTok for advertising dollars has been challenging for Snapchat, and it has struggled to consistently turn a profit. Apple's privacy feature has made it harder for advertisers to track users across apps and websites, creating further hurdles for social media companies.
Research firm eMarketer estimates Snapchat will account for 2.1% of US social media ad spending in 2025, but says that share will fall.
Snapchat's initial focus on disappearing messages made it difficult for the company to attract advertisers, since people generally don't want to see ads in the middle of a private conversation. But the company has updated its advertising tools and expanded where ads are shown, including between short videos.
While Snapchat is popular among Gen Z and millennials, its audience can limit what companies want to advertise on their platform.
“It definitely skews youth, and it naturally limits advertisers' interests in their audience,” said Max Willens, senior analyst at eMarketer. For example, if a company wants to advertise retirement planning, it will probably turn to Facebook rather than Snapchat.
On Snapchat, advertisers have also used augmented reality effects to promote their brands to younger audiences in creative ways. Snapchat users can transform themselves into a dancing McDonald's McRib sandwich or take a selfie with digital animals from Disney's Zootopia 2.
Snap is looking for other ways to make money. The company offers subscription plans that allow users to customize the app's wallpaper, personalize their digital avatars known as Bitmoji, and see how often their friends view their content. It began limiting free storage to 5 gigabytes. Artificial intelligence company Perplexity said it will pay Snap $400 million over a year to let users find answers using its “AI-powered answering system.”
In the third quarter, Snap's revenue reached $1.5 billion, up 10% from the same period last year. The company cut its net loss to $104 million, compared with a net loss of $153 million a year earlier.
This month, JP Morgan analysts raised their price target on Snap to $8 following the Perplexity deal but kept an underweight rating on the stock, meaning they expect the stock to underperform.
The firm said Snap has “significant market opportunity, an active user base and a solid track record of innovation,” but it is also looking for “more consistent execution, improved user and revenue trends, and greater profitability.”
Snap made a bold and expensive bet on the future of computing with a drone and glasses for taking photos and videos, although those products flopped. Snap now plans to release augmented reality glasses in 2026 that will allow people to interact with digital images superimposed on the physical world. Instead of reaching for your phone, people will be able to view documents, watch movies, play chess and more through the glasses.
For now, analysts say it's too early to tell whether Snap's bets will pay off or whether the company will end up in the social media graveyard like Myspace or Vine.
“There’s nothing written down that says if you’re a social media platform, you’re just going to stay here forever,” Willens said. “Although almost all of them are still somehow hanging around in one state or another.
