Snap's Monetization Challenge

Growth Without Leverage

Snap’s Q2 2025 earnings just dropped, and at first glance, the headline numbers look solid. Daily active users (DAUs) grew 9% YoY to 469 million. Revenue increased 9% to $1.345 billion. Snapchat+ subscriptions rose to nearly 16 million, and Snap’s content ecosystem is seeing record engagement, especially with Spotlight.

But if you’ve been following Snap for a while—or worked there, like I did—the story behind the numbers is more nuanced, and in many ways, deeply familiar.

My Time at Snap: Growth First, Monetization Later

I spent over two years at Snap, primarily working on Zenly, a location-based social app we’d grown to over 20 million DAUs. Zenly was a rocket ship. It had deep engagement, loyal communities, and incredible organic growth. Internally, the mantra was clear: focus on user growth. Monetization could come later. This was also the direction we had from Snap leadership.

That strategy wasn’t unusual, especially in consumer tech. But when the market shifted and Snap faced more financial scrutiny, Zenly was shut down—not due to lack of traction or potential, but because it wasn’t generating cash flow, despite the fact we’d never been given a goal of monetization.

Looking back, that decision said less about Zenly and more about Snap’s broader structural challenge: it’s a company that knows how to grow users, but has long struggled to monetize them.

Snap vs. the Industry: Revenue Per User Tells the Real Story

Let’s look at some benchmarks. Snap reported revenue of $1.345 billion on 469 million DAUs. That’s ~$2.87 revenue per DAU this quarter. For comparison:

• Meta (Q2 2025): Revenue of $47.52 billion on ~3.48 billion DAUs = ~$13.65 per DAU

• TikTok (estimates): Revenue in the $32B annual range with ~900MM DAUs = ~$8.89 per DAU per quarter

Snap lags significantly behind. Even with a strong user base and decent engagement, it's leaving money on the table. And TikTok is slowly stealing share and growing faster.

The issue isn’t just monetization volume—it’s monetization '“relevance.” Snap is still viewed by many advertisers as a brand play rather than a conversion machine. When budgets get tight, brand spend is often the first to go. Direct-response channels—those that show ROI in real time—are where dollars flow.

The AI Gap: Why the Performance Chasm Is Widening

A key reason this gap is growing? AI.

Meta leaned hard into AI-driven ad optimization through Advantage+ campaigns. TikTok is aggressively improving its ad products with machine learning at the core. These platforms not only provide better targeting but better creative optimization and predictive performance.

Snap, on the other hand, is still catching up. While it has introduced new formats like Sponsored Snaps—early data shows promising results like 2x conversion rates and increased dwell time—the infrastructure, tooling, and advertiser trust that fuels scaled performance just isn’t there yet.

Apple’s ATT (App Tracking Transparency) rollout in 2021 was a critical moment. It reshaped mobile advertising overnight. Meta suffered, then innovated. TikTok adapted fast. Snap stumbled—and has yet to fully recover. That delay matters in a world where ad efficacy and optimization are increasingly determined by how well your platform can leverage data, AI, and feedback loops.

A Structural Weakness in the Business Model

The consequences of this are structural, not just cyclical.

Snap’s DNA is user-first, which has driven incredible product innovations: AR lenses, Bitmoji, Discover, Spotlight. It iterates fast and delivers delightful consumer experiences. But the company’s monetization engine—the counterpart to all that user delight—hasn’t kept pace.

In my experience on Zenly, the focus on user experience was unwavering, and that was inspiring. But we also weren’t given the space or resources to build toward monetization because it was never one of the missions Snap asked from us. We were told, in so many words: grow first, we’ll figure out the money later.

But when later came, the company needed revenue *now*. And products that weren’t already contributing to the bottom line—no matter how promising—were deprioritized or shut down.

This speaks to a larger truth: Snap has relied too heavily on user growth as its north star, without pairing that with a long-term monetization strategy that could scale with it.

Bright Spots: Subscriptions, Spotlight, Sponsored Snaps

To Snap’s credit, there are glimmers of progress.

Snapchat+: Now nearing 16 million paid subscribers, the product is a promising bet on consumer revenue. It’s lightweight, easy to adopt, and adds value for Snap’s power users.

Spotlight: With over 550 million MAUs engaging and time spent up 23%, this TikTok-style feed is becoming a core part of Snap’s content ecosystem—and could become a strong monetization surface.

Sponsored Snaps: New ad formats show signs of converting well. If Snap can double down on performance-focused ad units and improve tools for advertisers, it may slowly shift perception.

But these are still early. The platform needs more than a few bright spots—it needs a transformation.

What Needs to Change

To close the gap, Snap needs to:

1. Rebuild Advertiser Trust: The recent glitch in its ad-buying platform that caused underpriced auctions highlights fragility in the core monetization engine. That erodes trust—especially among performance marketers.

2. Invest Heavily in AI-Driven Ad Products: Direct response advertising is now an AI problem as much as a creative one. Snap needs to catch up—fast.

3. Shift Perception from Brand to Conversion: Most advertisers still see Snap as an awareness platform. Until it can consistently deliver measurable ROI, budget allocations will stay constrained.

4. Support Product Teams With Monetization Infrastructure: Future Zenlys shouldn’t be told to just focus on growth with no path to revenue. That split-brain between user teams and monetization teams must be closed.

The Road Ahead

Snap has the user base, the product DNA, and the culture of innovation. But it’s operating in a market that increasingly rewards not just reach, but *revenue leverage*—the ability to turn users into dollars efficiently, repeatedly, and with scale.

Companies like Meta and TikTok have built structural advantages through better ad tech, smarter targeting, and stronger feedback loops. AI is only widening that moat.

Snap still feels like it’s playing offense on product and defense on monetization. And in 2025, that’s a tough combination to scale.

But if the company can take the same rigor it applies to consumer experience and turn it toward advertising—toward helping businesses grow, convert, and measure impact—it still has a shot to close the gap.

Because delighting users is table stakes. In today’s market, delivering ROI is the game.