Snap shut its 99-cent Lens Store after two months and made Lenses free to sell ads on them

In a February 2017 Fast Company piece on Snap Inc.'s IPO filing, a section titled 'Why We Sell Ads' admits that at the start the company did not know how it would make money. As server bills got expensive, it decided it needed to monetize fast.

Snap guessed that people who liked drawing on pictures would pay for more Lenses. It opened the Lens Store at the end of 2015, selling animations for 99 cents each as in-app purchases. Results were disappointing, so it closed the store after two months, in January 2016, and gave all the Lenses away free.

The filing said asking users to pay for creative tools was a bad idea because it added friction to self-expression. After the Lenses became free, users created more Snaps, and Snap decided to focus on advertiser-backed Sponsored Lenses and Geofilters as well as making many of its own.

A 99-cent purchase added a step to a spontaneous act.

Free tools led users to create more Snaps and spend more time on the app.

Advertisers would pay for a place inside the creative tool.

Snap could then keep building new free tools for everyone.

When a payment step suppresses the core behavior, give the feature away and charge a third party who benefits from the behavior.

Per the filing as reported, active users visited Snapchat more than 18 times a day and spent 25 to 30 minutes on the platform. Advertisers reportedly paid $100,000 to $700,000 a day for Lenses, and 2016 revenue was $404.5 million with average revenue per user of $1.05.