As a small business consultant who has helped dozens of entrepreneurs build successful companies, I‘m often asked about the ownership dynamics of major tech players like Snapchat.
Snapchat has become deeply embedded in youth culture. Yet many don‘t know the inside story of who founded Snapchat and who ultimately controls it today.
In this comprehensive deep dive, I‘ll unravel the past, present and future of Snapchat‘s ownership. You‘ll learn about:
- The college buddies who went from campus idea to IPO
- Snap‘s unconventional stock structure and what it means
- How Snapchat actually makes money
- Metrics that showcase Snapchat‘s relentless growth
Let‘s start at the very beginning – the college dorm room where Snapchat was born.
Snapchat‘s Origins: From Stanford Dorm Room to Tech Unicorn
Snapchat began as a campus project by three friends at Stanford University:
Evan Spiegel – A product design major who grew up in the wealthy suburb of Pacific Palisades, CA. He‘s said that Snapchat was inspired by wanting to show off his posh lifestyle.
Reggie Brown – An English major who came up with the prototype which he named Picaboo. He was later forced out and didn‘t get any equity.
Bobby Murphy – A math and computational science major who figured out how to actually build the Snapchat app.
The app launched in 2011 as Picaboo but quickly got renamed to Snapchat. It let users send photos that disappeared after a few seconds – something never seen before.
Snapchat‘s growth was explosive. By 2012, Snapchat shared over 50 million photos per day. Top venture capitalists came knocking with massive checks.
In 2014, Snapchat raised $485 million in funding at a $10 billion valuation despite negligible revenue. At this point, Snapchat was sending 700 million disappearing "Snaps" per day.
By September 2016, over 100 million users were on Snapchat daily. With a hot product and a youthful user base, Snap Inc. was ready to test the public markets.
In March 2017, Snap Inc. completed its IPO at a market cap of over $24 billion. The stock popped over 40% on day one, showcasing incredible investor demand.
For founders Evan Spiegel and Bobby Murphy, it capped a crazy 6-year entrepreneurial journey from campus experiment to leading a public company called Snap Inc.
Let‘s now examine how Snapchat‘s ownership structure allows its founders to still call the shots.
Snapchat‘s Unconventional Stock Structure Keeps Founders in Control
Most tech startups like Facebook and Google have a simple one share, one vote structure. Not Snap Inc.
Snap has three share classes:
Class A – Held by public investors. Have no voting rights.
Class B – Held by founders and insiders. Have 10 votes per share.
Class C – Non-economic shares with 1 vote per share.
Thanks to Class B super-voting shares, Evan Spiegel and Bobby Murphy control the majority of Snap‘s voting power.
Specifically:
- Evan Spiegel owns around 13% of Snap but controls 44% of voting power
- Bobby Murphy owns 15% but controls 26% voting power
This concentrated control insulates Snap from activist shareholders and allows the founders to focus long-term.
However, some view Snap‘s ownership structure as undemocratic and detrimental to outside investors. On the flipside, founders argue it protects the company from short-term Wall Street thinking.
Ultimately, Snap‘s founders have followed in the footsteps of other tech wunderkinds like Mark Zuckerberg and Jack Dorsey in retaining voting control. An unconventional structure for sure, but it‘s working for Snap so far.
Now let‘s analyze how Snapchat actually makes money from those 293 million loyal daily active users.
Demystifying Snapchat‘s Business Model and Revenue Sources
For a company with over $4 billion in annual revenue, Snapchat‘s business model is relatively simple. It makes money primarily by showing ads to users.
Snap has several ad products for brands:
Sponsored Lenses – Interactive filters that use augmented reality to alter faces or environments. Example: A Taco Bell-sponsored lens that turned users‘ heads into tacos.
Sponsored Geofilters – Location-based filters for events, stores, neighborhoods etc. Example: A Disneyland geofilter to celebrate the launch of a new ride.
Snap Ads – Full-screen vertical video ads in Stories. Example: A Snap Ad by Pepsi promoting its zero sugar drinks.
Commercials – Video ads run during publisher Stories on Discover. Example: A Nike commercial on ESPN‘s Discover channel.
Collection Ads – Scannable product catalogs that drive purchases. Example: A Collection Ad by Sephora showcasing their lipstick catalog.
These video and interactive ad formats keep Gen Z engaged. Snap also leverages user data to target ads based on age, location and interests.
As of 2022, Snapchat‘s 293 million daily active users are generating $3.44 in average revenue per user (ARPU) annually.
For comparison, other platforms like Facebook ($41 ARPU) and Instagram ($10 ARPU) currently monetize users better. So Snapchat has a long growth runway ahead on the revenue front.
Now let‘s look at some key stats that showcase the relentless growth Snapchat has seen in recent years.
Measuring Snapchat‘s Relentless Growth
For a company that‘s over a decade old, Snapchat is still adding users and engagement at a pace rivaling top social media platforms. Let‘s examine Snapchat‘s key growth metrics.
Daily Active Users
- 293 million daily active users as of 2022
- Grew 40% YoY from 209 million in 2021
- 92% of daily active users create content every day
Total Snaps Created
- Over 5 billion Snaps created every day on average
- Daily Snaps grew 19% YoY from 4 billion in 2021
Time Spent per User
- Over 30 minutes per user per day on average
- Time spent increased 22% YoY from ~25 minutes in 2021
Revenue Growth
- $4.6 billion revenue in 2024, up 12% YoY
- Average revenue per user is $3.44 globally
These figures show that Snapchat is far from peaking. Consistent double-digit growth in usage and revenue paint the picture of an innovative social platform with plenty of monetization upside still.
Snapchat‘s relentless innovation is also reflected in popular new features like Spotlight, Snap Map, Lenses, Games and more.
The Road Ahead for Snapchat
Snapchat has already achieved what every startup dreams of – going from campus origins to multi-billion dollar public company status in around 6 years.
But the Snap journey is far from over. Under founders Evan Spiegel and Bobby Murphy, Snapchat continues to pioneer new ways for Gen Z to communicate.
And despite competitive threats from apps like TikTok and Instagram copying features, Snapchat‘s focus on close friends and fun remains unmatched.
For small business owners, Snapchat represents a massive opportunity to engage with hard-to-reach young consumers who crave authenticity and creativity.
As Snapchat grows into the world‘s camera and becomes augmented reality-enabled, new possibilities will emerge for community builders and storytellers.
The company still has a long runway ahead in monetizing its highly engaged user base. And the priorities of Snap‘s founders remain growth and innovation above all else.
So don‘t expect Snap to fade away anytime soon. The Snapchat story still has many unwritten chapters left.
