Snap Inc's Revenue Model, Explained

Snap, Inc., the parent company of the social media app Snapchat, is being heavily scrutinized by many analysts and investors who are quick to point out the company's continued losses and declining user base.

But flying behind the radar is the fact that Snap's revenue is growing and expected to top $1 billion this year, which is more than double 2016's revenue rate. CNBC's Julia Boorstin took a look at how exactly Snap collects revenue and why it is expected to soar in 2017.

Snap said its app reaches 40 percent of the coveted 18 to 34 year old demographic group in the U.S., which generates revenue in four different ways.

Related Link: We Now Have Full Details Of Snap's IPO

1. The biggest source of revenue for Snap is ads. The ad begins with a full screen video for 10 seconds and gives the user an option to interact with the ad. In this case, Snap charges a fee per video load.
2. "Sponsored lenses" is an augmented reality feature that gives brands the ability to be put on a user's face and advertisers pay snap a daily flat fee.
3. "Geofilters" targets users within a specific geographic location and layers an image on top of photos.
4. Snap sells its own branded glasses called Spectacles, which sell for $130. However, the hardware hasn't generated any significant revenue as of yet.