The Clearing House - Corporate Changes in Payment Practices - September 2023

Snapchat to Test Family Plans in Push for New Subscribers

Snap, Snapchat

As Snapchat looks to grow adoption of its subscription program, the app is reportedly testing a “Friends & Family Plan,” as social media platforms look to find ways to monetize outside of ad sales. 

Code within the app spotted by Android Authority suggests that the social media app popular among Generation Z is adding a “Friends & Family Plan” to its Snapchat+ subscription program, which offers “exclusive, experimental and pre-release features” for a monthly fee.

In fact, the app’s subscription business is growing rapidly. Parent company Snap shared in a letter to investors accompanying its third-quarter financial results that Snapchat+ reached over 5 million subscribers during Q3, up from 4 million as of July. The revenue from Snapchat+ grew by more than 250% year over year, indicating increasing demand for the subscription service.

“We continued to diversify our revenue base with Snapchat+ — our subscription service that offers exclusive, experimental, and pre-release features which reached more than 5 million subscribers in Q3,” the letter stated. “We are pleased with the adoption we are seeing with Snapchat+ and remain focused on growing our subscriber base, improving retention, and offering new and innovative features.”

Yet subscribers make up only a marginal share of total users. As Snap Co-founder and CEO Evan Spiegel told analysts on the accompanying earnings call, the company saw 406 million daily active users in Q3. As such, the app’s paid subscriber base is only 0.01% of the size of its daily active usership, suggesting significant under-penetration. 

The move to add new subscription plans comes as the social media app, much like others in the space, looks to supplement its ad and in-app purchasing revenue. According to the report “Tracking the Digital Payments Takeover: Monetizing Social Media,” created by PYMNTS Intelligence in collaboration with Amazon Web Services (AWS), which drew from a survey of nearly 3,000 U.S. consumers, only 8% of consumers had made purchases via Snapchat in the previous month. 

When it comes to advertising, the app fares better, with the company leveraging artificial intelligence (AI) to boost its ad capabilities and with brands returning to the platform. 

Across the industry, social media apps are turning to paid subscriptions to drive revenue. Elon Musk recently shared that X is set to begin offering two-tiered premium X subscriptions, one “with all features, but no reduction in ads, and the other is more expensive, but has no ads,” according to a post on the platform last month.

Also last month, it was reported that TikTok is testing an ad-free monthly subscription plan. Reached by PYMNTS, a TikTok spokesperson said this offering is being tested in one market outside the United States.

Meanwhile, Meta recently announced a new ad-free subscription option in Europe, which comes amid evolving regulations that demand new approaches to social media monetization. The subscriptions range from 9.99 euros (about $11) a month to 12.99 euros (about $14) a month depending on the device. Meanwhile, those who do not purchase a subscription will continue to receive targeted ads.