Snapchat is potentially the most undervalued and overlooked social media platform.

And that's because unless the year of your birth begins with a 2, it's likely you've written off Snapchat as a remnant of the past and an app just for ephemeral nude sharing.

And while the latter might be true, Snapchat is still growing, and pretty fast, with their parent company, Snap, reporting 432 million daily active users, and 800 million monthly active users.

While this might fall short of the astronomical numbers posted by the likes of Facebook, Instagram and TikTok, it's still far more than platforms like Twitter, which we all apparently have to endlessly care about.

The thing is, despite Snapchat being far bigger than you might have expected, the company is still struggling, with its CEO recently announcing some pretty radical changes to try and save the company.

So let's unpack Snapchat's popularity paradox, why it's struggling despite its huge user success, and why solving this problem might be harder than it first appears.

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So we've already established that Snapchat is still a massively popular and growing platform.

But let's dig into why this is.

A major part of Snapchat's appeal is its ephemeral content and creative tools, both of which resonate deeply with younger demographics.

Features like Stories, Disappearing Messages, Augmented Reality Lenses and Bitmoji have made Snapchat into an incredibly popular platform for younger generations looking for an outlet for self-expression.

In fact, the platform's design actively encourages this kind of spontaneity, with content that feels more personal and less polished than what's typically served up on rival apps.

For many users, Snapchat offers a private, less permanent space to interact with their friends, far removed from the curated feeds of other social media platforms.

And this is something that Snapchat have actually been advertising based on recently, showing off this feature.

And ultimately, you can see how powerful this trend is by how quickly other apps, especially Instagram, have borrowed these concepts and features, from Stories to Disappearing Messages.

However, this very appeal is in itself a paradox.

While Snapchat is incredibly popular among its younger user base, this demographic isn't exactly aligned with the standard revenue models pioneered and mastered by Meta and other major social media apps.

Snapchat has the users, but it can't monetize them.

But why?

Well, firstly, having a strong, focused, younger user base means that Snapchat's audience is nowhere near as diverse or broad as its competitors are.

Facebook might wish that younger people still thought it was as cool as Snapchat, but while incredibly active, this younger age group tends to have less disposable income and different spending habits than older demographics.

As such, advertisers prefer platforms with a more varied user base, where they can target different segments of the population, including those with more purchasing power, i.e. those with income streams more significant than just pocket money.

It's not just the users either.

Snapchat's ad platform has historically been far less sophisticated than their competitors.

Back when they first introduced them, Snapchat's advertising tools were far less developed, lacking the targeting, measurement, and analytics capability that advertisers learned to expect.

This made it harder for Snapchat to attract large-scale ad campaigns, as advertisers were hesitant to allocate significant budgets to a platform where the return on investment was uncertain.

Even now, the tools and infrastructure offered by Snapchat lags behind, limiting the investment that major companies feel happy to pour into it.

Even if advertisers did make the jump though, the content itself is inherently difficult to monetize.

While vertical video and ephemeral content are key to the appeal of the platform, they're also just really hard to advertise against.

That's partly because brands are just more used to making vertical and static content for TV, VOD, and print, so developing new vertical-friendly content requires additional time, effort, and creativity.

But that doesn't fully explain the issue, because the likes of TikTok seem to be doing fine in converting advertisers to digital and vertical.

So it's also that placing ads on a platform like Snap specifically is just hard.

Sure, you can stick some ads within the discovery feed and between stories.

In fact, that goes some way to explain why the company has put so much emphasis on these areas in recent years.

But this can only go so far.

After all, people are coming to Snapchat primarily to send photos, videos, and chat.

Thus far, Snapchat have refused to properly implement ads in this core section of the app, giving them far fewer platforms to surface ads than something like YouTube or Facebook that can constantly dump ads wherever they feel like.

With these barriers in place, many advertisers have just decided to go elsewhere.

Snap might have a big audience, but that audience is sufficiently hard to reach, target, and analyse through Snapchat that many advertisers have just decided that it'll be easier to go to rival platforms like TikTok to find a very similar audience.

Admittedly, their competitors are also having similar issues.

Since Apple introduced the app tracking transparency policy in 2021, it's become far harder for companies to track users between apps.

Now, that's a good thing from a privacy perspective, but it's made it harder for companies to target users, and reduced advertising rates across the industry.

And all of this has hit Snapchat particularly hard, as a mobile-only company who are particularly popular in countries where iOS is dominant.

So how can Snapchat solve these issues?

Well, they've recently announced some pretty major changes to the app.

They're planning on redesigning Snapchat's infamously hostile navigation system to try and attract more, especially older users, and also to emphasise some of the easier-to-monetise areas of the app.

They're also rolling out more advertising across the platform, with them even planning to introduce adverts in the middle of chat conversations, something that essentially no other platform has tried, for kind of obvious reasons.

Now, these changes are obviously going to annoy some people, but in his announcement, CEO Evan Spiegel tacitly admitted that they were being forced into making these changes due to their fiscal constraints, saying that the growth of our digital advertising business is one of our most important inputs to our long-term revenue potential, and investors are concerned that we aren't growing faster.

And to be fair, Snapchat genuinely doesn't have many other great options here.

Ordinarily, a company like Snapchat, with a highly loyal and growing user base, would be the ideal target for an acquisition by a bigger market player like Meta.

In fact, they did try to acquire Snap back in 2013 for more than $3 billion.

However, back then, Spiegel wasn't keen, and since, he's spoken at length about the independence of Snap and its value as a rival to the big social media behemoths.

So unless he's under a lot of pressure, he's likely to continue resisting a sale to the likes of Meta.

Now obviously, Meta isn't the only option.

But regardless of the acquirer, deals like this are facing increased regulatory scrutiny in the US, with the market for major acquisitions substantially chilled under Biden.

Now a new administration in the White House could theoretically change this, but Trump's not the biggest fan of social media either, and Vance actually praised FTC Chair Lina Khan recently, describing her as one of the few people in the Biden administration I think is doing a pretty good job.

As such, an acquisition for Snap looks pretty hard at this point, but admittedly not impossible.

Larger companies are still likely to be interested, with other platforms struggling to attract younger users.

Adding Snap to another existing company could help to onboard a very useful audience.

Not only that, other companies are also likely confident that they could better monetize Snapchat than Snap do, increasing the company's earnings per user, and maybe, just maybe, actually turning a proper profit.

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