Snap to launch creator subscriptions in push to diversify revenue

Snap is introducing a subscription feature that will allow creators to earn recurring income directly from their most engaged fans, as the social media company works to diversify beyond advertising.

The Los Angeles company will begin testing “Creator Subscriptions,” as the feature is called, on Monday, starting with a small cohort of Snapchat creators, the company told CNBC exclusively. With user growth moderating, Snap’s expansion into paid creator subscriptions emphasizes the company’s initiative to grow income beyond advertising and build more predictable revenue streams.

“In the year ahead, growth in subscribers will be a critical input metric to track our progress,” Snap CEO Evan Spiegel wrote earlier this month as part of the company’s fourth-quarter results.

Snap’s existing subscription offerings, Snapchat+ and Memories Storage Plans, grew 71% year over year to reach 24 million users in the period. However, the company reported 474 million daily active users, down 3 million from the previous quarter.

With the upcoming feature, Snapchat users will be able to pay to subscribe to their favorite creators and receive exclusive content, including direct photos or videos, as well as access a subscriber-only Story and send text-based replies that can be featured at the top of a creator’s public Story.

“We want the next step in our long-term creator monetization journey to be one that’s really rooted in real relationships,” said Jim Shepherd, Snap’s head of content partnerships, in an interview with CNBC. “And help creators expand the ways that they make money in a way that’s predictable and they can make money from their most engaged fans.”

Snap is entering an increasingly crowded market for direct-to-fan subscriptions.

Platforms like Patreon, Substack and OnlyFans are built around paid memberships, while major social media companies have introduced their own in-app subscription tools. In 2018, Google’s YouTube started offering Channel Memberships, where creators receive 70% of membership revenue after taxes and fees are deducted, with transaction costs covered by the company. In 2020 and 2022, respectively, Meta’s Facebook and Instagram began allowing creators to offer subscriptions, and Meta currently lets them keep 100% of subscription revenue after fees, according to company’s website.

On Snapchat, creators will be able to set their own subscription price within a range of $4.99 to $19.99 per month. After platform fees, creators will receive approximately 60% of subscription revenue. Snap said it will provide creators with performance data to help guide pricing decisions as the product evolves beyond its initial test phase.

Snap’s initial group includes 15 creators to start, with roughly 10 more expected in the U.S. during the early test phase. The company said outreach is also underway in Canada, the U.K. and France. Participants include popular creators like David Dobrik, Catherine Paiz, Harry Jowsey, Jeremiah Brown and Skai Jackson.

“We’ve built a place where their income feels really rewarding, consistent, sustainable,” Shepherd said. Creators “consistently say that it’s a great place where they can make a living by being themselves.”

Creators on Snapchat currently earn revenue through ads in Stories and Spotlight under the company’s Unified Monetization Program as well as through brand partnerships.

Shepherd said that Snap’s advantage lies in distribution and discovery through the company’s Spotlight feature, which shows users short-form videos from other users on the app.

“We have a built-in distribution engine where so many creators are building fandoms,” Shepherd said.

Over the coming weeks, the feature will be available for users in eligible countries using Apple iOS devices. Creators Subscriptions will not be available for Android users initially, and the company did not say when that will change.

WATCH: CNBC’s full interview with Snap CEO Evan Spiegel