Snapchat's business model focuses on its large user base of mostly younger users. It generates nearly all of its revenue from advertising on its platform. Key activities include growing its user and partner base, innovating features to improve the user experience, and marketing. Key resources are content from users, employees, and intellectual property. Key partners are users, content creators, advertisers, and developers. While revenue has increased in recent years, Snapchat has lost billions since 2018 and must address challenges like time limitations for ads to achieve profitability.

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Entertainment Business Model
EMB Assignment 3
Snapchat (Snap Inc.)
Casjmia Ellis
05/21//2022
John Multhauf, Entertainment Business Model

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Entertainment Business Model: Snapchat (Snap Inc.)
Why I Chose This Company
I chose Snapchat because I have used the app myself, and while I was using the app, I really
enjoyed the features that were available, especially the cool filters. It fits my career goals
because I want to have an entertainment venue, and I know that Snapchat allows businesses to
advertise on its platform. It is a good marketing and advertising platform to reach a younger
audience compared to other platforms.
Background Information
Snap Inc. is an American-based camera company that was founded on 09/16//2011. The
founders of the company include Evan Spiegel, Reggie Brown, and Bobby Murphy, who created
the business to empower people to express themselves, have fun and understand the world. These
founders were inspired by their perceptions that emoticons were not effective in transmitting the
desired emotions that matched the preferences of the users. The company’s core business is to
develop and maintain image messaging together with the multimedia mobile app Snapchat. Snap
Inc. manufactures and develops spectacles and smart glasses for connection with a user’s
Snapchat account. The firm’s flagship product, known as Snapchat, is a camera application that
enables visual communication amongst users via images and videos known as snaps. Snap Inc. is
a camera firm that enables effective communication amongst users through snaps: understanding
the four elements of the business model, such as customer segments, value proposition, channels
of distribution, and customer relationships, is critical in knowing how the industry works.

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Customer Segments
• The majority of Snapchat users are young females aged 13-29 years. Approximately 54.4% of
users are female, while 44.6% are male (Golishsays:, 2022). These users are commonly
distributed throughout Europe, Asia, the Middle East, and North America. Recently, adults aged
up to 55 years have been using Snapchat, with baby boomers holding a small fraction of the
Snapchat users (Franzmann et al., 2020).
• Snapchat Inc. targets generation Z and millennials as the product is customized to meet their
social media network needs. India has the most extensive Snapchat base globally, with an
audience of approximately 126 million. The United States is ranked second, with almost 107
million Snapchat users (Wirtz, 2020).
• Globally, the platform is projected to be used by nearly 400 million users by 2024 (Goanta &
Wildhaber, 2019). The reach of Snapchat advertising audiences constitutes 8.4% population aged
above 13 years. The platform is user-friendly, attracting more users daily. The targeted users, the
youths, prefer the platform as their needs have been considered by the founders while innovating
the platform.
• The number of daily active users is approximately 319 million, while the number of snaps
designed daily is nearly 5 billion.
Value Proposition
• Snapchat’s value proposition is authenticity. Users do not have to worry about privacy and
embarrassment, enabling a direct benchmark. People post whatever they want without censoring
or curating themselves (Zanetti, 2022).

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• It is a reliable platform for users as it enhances fast and convenient communication. Users can
send messages to friends and families within their geographical coverage or globally without any
interruptions. It is an ideal platform that the young generation can use for advertising
• Users express themselves through videos and photos with the help of filters and editions
(Tropp & Baetzgen, 2019). Social media enthusiasts have a reliable platform that meets their
communication needs. The creativity of the Snapchat tools makes it possible for users to interact
with brands and ads without realizing any interruptions quickly.
• The self-serving tools that the platform has enable ease of navigation amongst users (Perkovic
et al., 2018). Snapchat is downloaded for free by users, and all its features are free, attracting
more users to the platform. • Discreet Communication among users, this enables privacy on the
platform.
Channels of Distribution
• Snapchat is accessed by downloading the mobile app on a smartphone or tablet.
• Distribution channels involve a set of processes that enable the products and services of
Snapchat to reach the targeted clientele base within a stipulated period. These products and
services are either distributed from the company directly to clients or through retailers.
• The distribution channels enable product customization options (Cunningham & Craig, 2019).
Such services are available at the point of sale, enabling opportunities for clients to access
products in assortment. Through the distribution channels, customers learn about the Snapchat
platform for enhanced product quality assurance (Westbrook & Westbrook, 2018).

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• When customers have a central place through which they can access the Snapchat services and
make related inquiries, convenience and reliability are enhanced. Channels of distribution enable
timely delivery of products and services, enhancing the satisfaction levels of clients. The
channels of distribution can either be direct or indirect, depending on the nature of the clientele
base within a particular geographical coverage.
Customer Relationships
• Snapchat Inc. has high regard for customer relationships. Clients are handled with
professionalism enabling customer satisfaction. In case of inquiries, the customer service
representatives attend to them in real-time by providing timely responses to queries (Lee, 2018).
• Snapchat is a product customized to meet users' needs, especially social media enthusiasts
(Bipat et al., 2019). The social interactions allowed by Snapchat enable valuable customer
relationships.
• A better user experience is ensured as the platform prioritizes clients' interests compared to
advertisers.
• Snapchat Inc. highly values client feedback on the reliability and convenience of the platform
as through such information, the firm identifies areas of improvement to attract and retain more
users. In case of negative feedback, the customer relations department at Snap Inc. identifies the
source of a complaint. Relevant resolutions are settled for to address any challenges.
Key Activities

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 Growing base of all key partners: Customers and partners base is a means by which a
company makes sales and yields revenue. A business cannot survive for long without an
adequate client base. Therefore, Snapchat focuses on maintaining and expanding all key
partners base. Consequently, in the first quarter of 2022, the company added 13 million
more daily active users, rising to 332 million from 319 in 2021 (Statista, 2022).
 Innovating and improving user experience: Innovative designs that enhance user
experience are critical for business growth. Snap’s core activity is to develop innovative
product features that surpass all other social media platforms. As a result, users can 3D
paint on their selfies today, build content based on their Bitmoji characters, and access
innovative gaming features.
 Marketing: Snapchat also focuses on a marketing content for businesses through their
platform. The company allows other firms to advertise through its Ads Manager. It also
helps them age-target their custom creations to reach target audiences and location-target
to reach customers in a specific area (Hubspot, n.d).
 Enhancing Algorithms: Snapchat also focuses on redesigning and improving algorithms
for ease of use. The company’s effort has enabled it to create different algorithms that
show users the most engaging snaps that interest them. Some developed algorithms
include algorithms for best friends, quick ads, story views, spotlight, and face detection
(Gandola, 2022).
Key Resources
 Content: Content is a crucial resource necessary to perform the key activities. These
include images, videos, audio, snaps, and stories. This content plays an integral role in

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meeting Snapchat and business objectives, including brand recognition, user engagement,
thought leadership, and lead generation.
 Users: Snapchat users are also critical in accomplishing the company’s activities. Without
users, the business cannot continue to exist. Therefore, to generate sales, drive revenue,
or thrive, the company must have users to help meet objectives. The company’s users are
primarily teenagers and adults aged 13-29 years (Statista, 2022).
 Staff: Employees are also a critical resource for Snapchat’s success. Without workers, a
company cannot provide products and services to customers. Accordingly, the company
has continuously hired people, and as of February 2022, it had 5661 staff members
(Aslam, 2021)
 Intellectual property: Snapchat has various patents that are part of its resources. The
patents include content collection navigation and auto-forwarding, eyewear having
linkage assembly between a temple and a frame, eyewear having a selectively exposable
feature, and prioritization of messages within the gallery. Others include a content
delivery network for ephemeral objects, apparatus and method for automated privacy
protection in distributed images, and a gallery of messages from individuals with a shared
interest (“Patents assigned to Snapchat, Inc,” n.d).
Key Partners
 Users: Snapchat users are key partners who offer the most content, which drives
engagement. They generate content that can be effectively utilized for the brand.
Significantly, users provide authentic, crowd-sourced, and peer-endorsed content, thereby
resonating with followers and enabling marketers to use the information to generate
leads.

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 Content creators: These partners incorporate people who make content for the Snapchat
platform. They include influencers, websites, magazines, and media outlets. Anyone can
be a content creator for Snapchat as long as one has at least 100 subscribers, a week-old
profile, and one bi-directional friend (“Aspiring and pro creators,” n.d).
 Advertisers: This group of partners includes firms that support the Snapchat business
model. They pay for adverts and sponsorship. The company has experienced a dramatic
growth of advertisers as companies adapt to social media marketing trends. The top
Snapchat advertisers include Exxon Mobil, Lyft, Walt Disney, MagiQuiz, Pepsico, State
Firm, McDonald’s, and Sony (“8 top Snapchat advertisers,” 2019).
 Developers: These partners include third-parties apps that affiliate with Snapchat. They
develop powerful tools and flexible snap solutions that aid in bringing users’
imaginations to life across platforms. They incorporate Snap Games, Snap AR, Snap Kit,
and Snap Minis (“Develop with snap,” n.d).
Cost Structure
 Research and Development (R & D) expenditure: R & D is critical for any business. It
helps develop new products and services to survive and thrive in today’s competitive
market. Snapchat has continuously invested annually in R & D to gain a competitive
advantage. Snapchat spent $1.56 million in 2021 for R & D (“Snap Inc,” n.d).
 Sales and marketing: For Snapchat to make its products and services known, they use
sales and marketing as a bottom line. However, unlocking new opportunities and
generating leads comes at a cost. By the end of 2021, Snapchat total sales and marketing
expenses for the year were $792,764, an increase from $555,468 in 2020 (“Snap Inc,”
n.d).

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 General and administrative costs: These expenses are day-to-day costs that Snapchat
must pay to operate. These costs include rent, salaries and wages, utilities, insurance fees,
consultant charges, and subscriptions. In 2021, Snapchat spent $710,640 on these costs,
up from $529,164 in 2020
Revenue streams
 Advertising: Advertising is the main source of Snapchat revenue, accounting for
approximately 98%. The platform drives user engagement, attracting advertisers for Snap
Ads. The cost of each advertisement relies on the campaign objective or duration. The
company requirement is a minimum of $ 5 billed on a cost per thousand impressions.
Besides, about 2 % comes from physical sunglasses, spectacles that connect to the
Snapchat app and take videos that users require to share. By the end of 2021, Snapchat
generated $4,117 million, an increment from $2,507 million in 2020. The company has
experienced increased revenue due to its investments in augmented reality, changing how
the Snapchat community experiences the world through its camera. Consequently, more
users have joined the platform, translating to more advertising and increasing revenue.
Conclusion
Snapchat’s ‘consolidated operating statement’ shows that Snapchat has minimal income
and has lost nearly $4 billion since 2018. Although the loss levels are declining somewhat, it is
not clear how long can that continue.. Over the last five years, An expanding customer base
translates to increased sales. Additionally, Snapchat has been generating more revenue. In 2018,
the company generated $ 1,180 million, while in 2021, it had $4,117 million, which is a 348
percent increase. These figures indicate that Snapchat can get its break-even point, if they
continue to thrive in today’s competitive market. However, one of the issues that Snapchat

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should address is time limitations. In Snap Ads, video clips for business advertisements have a
ten-second limit, and content disappears after 24 hours. This issue increases the need for
advertisers to post more content more frequently, which may not be appealing to many firms.
Therefore, Snapchat Inc. should redesign the platform so that video Ads have an adequate time
limit and marketing content can stay longer.
References
Bipat, T., Bos, M. W., Vaish, R., & Monroy-Hernández, A. (2019, May). Analyzing the use of
camera glasses in the wild. In Proceedings of the 2019 CHI Conference on Human Factors in
Computing Systems (pp. 1-8).
Cunningham, S., & Craig, D. (2019). Social media entertainment. In Social Media
Entertainment. New York University Press.
Snapchat by the numbers: Stats, Demographics & Fun Facts. Snapchat by the Numbers: Stats,
Demographics & Fun Facts. (n.d.). Retrieved May 8, 2022, from
https://www.omnicoreagency.com/snapchat-statistics/
Franzmann, D., Eichner, A., & Holten, R. (2020). How mobile app design overhauls can be
disastrous in terms of user perception: The case of snapchat. ACM Transactions on Social
Computing, 3(4), 1-21.
Goanta, C., & Wildhaber, I. (2019). In the Business of Influence: Contractual Practices and
Social Media Content Monetisation. Schweizerische Zeitschrift für Wirtschafts-und
Finanzmarktrecht, (91), 346-357.

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Golishsays:, K. (2022, January 5). Snapchat Demographic stats: How many people use Snapchat
in 2022? Backlinko. Retrieved May 8, 2022, from https://backlinko.com/snapchat-users -
howmanysnaps-are-created-daily
Lee, E. J. (2018). Snapping Up Legacy Media: Using Theory of Affordances to Explain How
News Outlets Behave on Snapchat.
8 top Snapchat advertisers. (2019, November 13). WordPress. https://mediaradar.com/blog/8-
top-snapchat-advertisers/
Aslam, S. (2021). Snapchat by the numbers (2021): Stats, demographics & fun
facts. Omnicoreagency. https://www.omnicoreagency.com/snapchat-statistics/
Aspiring and pro creators. (n.d.). Snapchat Creator Hub I. https://creators.snap.com/learn-get-
started-for-aspiring-and-professional-creators
Develop with Snap. (n.d.). Snap for Developers. https://developers.snap.com/
Gandola, K. (2022, April 8). How the Snapchat algorithm works. Net
Influencer. https://www.netinfluencer.com/how-the-snapchat-algorithm-works/
HubSpot. (n.d.). Snapchat marketing: The ultimate guide. https://www.hubspot.com/snapchat-
marketing
Patents assigned to
Snapchat,Inc.(n.d.).JustiaPatents. https://patents.justia.com/assignee/snapchat-inc
Snap Inc. Announces fourth quarter and full-year 2021 financial results. (n.d.). Snap Inc. -
Investor Relations. https://investor.snap.com/news/news-details/2022/Snap-Inc.-
Announces-Fourth-Quarter-and-Full-Year-2021-Financial-Results/default.aspx
Statista. (2022, April 22). Snapchat: Daily active users worldwide. Statista.
https://www.statista.com/statistics/545967/snapchat-app-dau/

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Statista. (2022, February 5). Snap R&D spending 2020. Statista.
https://www.statista.com/statistics/668089/annual-snap-research-spend/