Snap bets on subscriptions as AI powers next phase of growth

MUMBAI: Snap is trying to turn streaks into subscriptions. The social media company is looking beyond advertising, betting that artificial intelligence and premium features can persuade millions more users to pay for a richer Snapchat experience.

Snap Inc. is doubling down on subscription-led growth, with Chief Executive Officer Evan Spiegel saying the company has only scratched the surface of its premium business as it seeks to build a stronger second revenue engine alongside advertising.

Speaking during the company’s latest earnings call, Spiegel said less than 3 per cent of Snapchat’s monthly active users currently pay for subscription services, leaving significant room for expansion. He noted that mature app-based subscription businesses typically achieve subscriber penetration of 7 per cent to 12 per cent, suggesting Snap has considerable headroom to grow its paying user base.

Rather than relying on price increases, Spiegel said the company’s strategy is to make premium offerings increasingly valuable through new features and experiences. A key part of that push is Lens+, the recently launched subscription tier that integrates AI-powered creative tools aimed at attracting more users to paid plans.

Artificial intelligence is also central to Snap’s longer-term ambitions. Spiegel pointed to the company’s Spectacles platform as part of its vision for AI-powered wearable devices, which he believes could eventually redefine how people interact with digital content.

The strategy is already beginning to reshape Snap’s revenue mix. The company’s subscription portfolio including Snapchat+, Memories Storage and Lens+ helped drive an 85 per cent year-on-year jump in its other revenue segment to $316 million (around Rs 2,760 crore) during the second quarter, reinforcing subscriptions as an increasingly meaningful business beyond advertising.

Overall, Snap reported second-quarter revenue of $1.6 billion (around Rs 13,980 crore), beating market expectations, while posting an adjusted loss of 10 cents per share.

Looking ahead, the company forecast third-quarter revenue between $1.70 billion and $1.74 billion (around Rs 14,850 crore to Rs 15,200 crore) and adjusted EBITDA of $300 million to $350 million (around Rs 2,620 crore to Rs 3,060 crore), reflecting confidence in continued business momentum.

Investors welcomed the outlook. Snap shares gained during regular trading before extending their rally in after-hours trade, as the company’s improving revenue mix and growing subscription business strengthened confidence that its future may depend as much on paying users as on advertisers.