Snapchat Bets on Subscription, AI Features to Offset ARPU

In an effort to counteract dwindling revenue per user, Snapchat is turning to its emerging subscription service, Snapchat+, and enhancing it with Artificial Intelligence (AI) functionalities. Despite a 5% decrease in average revenue per user (ARPU) year over year, as reported by its parent company Snap Inc., North America saw a modest 2% increase. By integrating AI into its subscription scheme, Snapchat aims not only to retain but also to grow its subscriber base.

The company expressed optimism in its latest financial report, stressing the importance of diversifying revenue streams. Particularly, Snapchat’s CEO Evan Spiegel highlighted the addition of AI to the Snapchat+ subscription, emphasizing how it facilitates the creation and editing of snaps in novel ways. This move has proven effective, as demonstrated by the platform reaching over 7 million Snapchat+ subscribers in the fourth quarter.

These strategic moves come at a time when social media platforms are exploring various monetization routes. A report titled “Tracking the Digital Payments Takeover: Monetizing Social Media,” highlighted the challenges of translating social media browsing into actual purchases, with only a small fraction of users buying products through social media despite their interest.

Nevertheless, the industry continues to innovate, with platforms like TikTok experimenting with shoppable content and Snapchat leveraging AI to not only attract subscribers but also enhance user engagement. As the landscape evolves, Snapchat is doubling down on AI and subscription services to navigate its ARPU challenges and maintain its competitive edge in the social media arena.

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