By incorporating a paid storage of Memories, which enables Snapchatters to save photos and videos, Snap Inc. has permanently changed its relationship with users. The company has been providing unlimited free storage, but now it limits free storage to 5GB and asks heavy users to subscribe to tier-based storage with prices varying between 1.99 and 15.99 per month. This move is symptomatic of the increasingly expensive process of sustaining such a large archive as well as a calculated shift towards repetitive sources of revenue.
The Infrastructure Crisis
Memories has expanded much bigger than what Snap had anticipated since its debut in 2016. More than a trillion Memories have been saved by the users, turning what was intended to be a temporary messaging service into a surprising archival service. Snapchat created a content infrastructure around temporary content that dissolves when it is viewed rather than one designed to be stored. The continuing storage of such a huge amount of data has caused the operation costs to continue to rise at levels that the company finds unsustainable with the initial free plan.
The intentionality behind the 5GB threshold was to ensure that the heavy load test results are accurate. Snap can attest that the majority of users exceed this limit and will not notice any changes. The policy applies to power users with accrued content since 2016--the group that incurs the highest storage expenses. This discriminatory strategy also enables Snap to generate revenue on those users who are the most engaged and not a general backlash by those who are not impacted.
Three Tiers of Paid Storage
Snap has packaged its paid products in a way as to promote usage of its ecosystem of premium subscriptions:
Memories Only plan offers 100GB at 1.99 a month. This is a free-to-use option that is offered to the user who may require extra storage but does not want extra features.
Snapchat+ is available in 250GB at $3.99 per month, which comes with some additional special features such as AI Captions, Custom App Icons, and Story Boost. The costing is a very strong motivator: with an extra 150GB storage space and many features not included in the basic plan, customers need only to pay a little more than a dollar to access this extra capacity.
Snapchat Platinum is aimed at users with 5TB of storage at a cost of 15.99 per month, which shows that Snap is willing to provide its services to those who use the platform as an archival resource.
The pricing model shows the overall strategy of Snap. The company is not merely making a sale of storage- it is capitalizing on the need to store information to push the user to the entire Snapchat+ offer. The difference in marginal costs between levels incentivizes users to upgrade to higher value subscriptions which results in higher average revenue per customer than would be raised by standalone storage fees.
More Than Advertising
Digital advertising revenue has traditionally been the main source of income in Snap, which is a fluctuating source of revenue prone to economic cycles and high competition. Monetizing Memories creates an alternate source of revenue that is not affected by the changes in advertising. This fits well into industry trends where tech companies have realized that recurrent subscription funds are more likely to allow them to be financially stable than ad-supported models.
Investors consider this action to be a big step in terms of investor perception. Repeat storage plans enable Snap to position itself as a hybrid consumer service concept, and not an advertising platform. This predictable revenue is similar to that of Apple iCloud, which started as a free 5GB plan and grew to be a multi-billion dollar contributor to the Apple services sector. This could yield hundreds of millions of extra annual revenue, should even a small percentage of the daily active users of Snapchat become paid storage users.
Context and Competition in the industry
Snaps 5GB free storage is comparable to Apple iCloud storage, and Google offers 15GB of storage which can be shared among Gmail, Drive and Photos. The pricing is also consistent with the market standards- 100GB is priced at 1.99, which is a perfect match as compared to Google Photos. But the competitive edge that Snap will have is not utility but emotional value.
Memories are filled with content specific to filters, contexts and social experiences at Snapchat unlike iCloud or Google Drive, which store generic files and backups. These Memories are perceived by users as something that cannot be replaced but something that cannot be changed to the data files. Such an emotional attachment forms what analysts refer to as an emotional moat--customers are not so price-sensitive with this particular archive since the data is typically not replicated elsewhere. Snap is successfully commercializing nostalgia and life story.
The User Response and the Transition Period
Users who pass the 5GB mark will have 12 months grace period to make their choice: pay to get more space, download current content, or delete older Memories to get under the free limit. This one-year window has more than benevolent strategic implications. It causes the user friction to maximize at a later point, reduces immediate backlash, and put a bet on the user finding the idea of downloading thousands of Memories too painful and thus able to subscribe with minimum resistance.
The policy has received a backlash, as users labelled the change as greedy following years of free service. Snap recognised how challenging the shift towards paid service would be, but said that it would be the only solution to long-term economic sustainability and further investment in the feature.
The retention policy supports the stickiness of the subscription by imposing severe penalties. Customers that cancel the paid plans but exceeding 5GB are given 48 hours within which they can resubscribe or the amount of excess Memories will be deleted forever. Such a close gap produces a great deterrence to lapse of subscription so that payment is paid constantly by users who do not want to lose their archives.
Long-Term Implications
The pivot helps Snap to make Memories a revenue center rather than a cost center. The company has been able to repackage a free feature that has resulted in unknown costs into a payable service that covers its own internal infrastructure costs and adds to the total profitability.
In the business model of Snap, this is a radical change. The company has diversified sources of revenue which have minimized revenue volatility through advertising. Storage fees are recurrent, allowing an investor to predict a consistent flow of cash which is attractive to investors who need to find stability in their financial forecasts.
To the users, especially long-term power users, the change validates the fact that their digital history has now been turned into a product and is assigned some value. The time and money that users had already invested in their Memories archive over the years now turn into a continued financial investment to keep it going.
Days of free storage indefinitely on Snapchat are over. Instead, a subscription-based approach that reflects the wider industry trends of cloud storage should be introduced and capitalizes on the special emotional value of social media archives. How users perceive this as either rational accommodation of infrastructure facts or opportunistic profit-making on the audiences they capture will influence the manner in which Snap will engage with its community over the next few years.