【Japan】

Snapchat needs to make more money,Japan sure. But even more than that, the now-public company needs to attract more advertisers — even to its lower cost ad options — in hopes of turning them into big spenders and cementing the app as a must-buy digital ad platform.

To do so, Snapchat is turning to one of its oldest tools: Geofilters.

The app, once primarily heralded for its sexting capabilities, is in a need of cash and attention amid its growth period less than a month after going public. How it's doing that — beyond inking deals with the world's biggest entertainment studios — is convincing businesses that they should fork over a few hundred dollars per year and make an annual commitment to have geofilters on the app.

Geofilters allow Snapchat users to overlay artistic designs over their selfies or other photos and videos. As soon as they take a snap, Snapchat users have access to a handful of filters targeted to their specific location. The ones that are actually bringing in revenue are sponsored geofilters, made and paid for by brands.

That move, starting last year, is a departure from pitching other options like sponsored lenses and video ads that cost in the six-figures and therefore attract only wealthy, big-name brands.

Barry's Bootcamp, the workout chain with 18 locations (including one by Snapchat's HQ in Venice, California), is one of the latest sign-ups for sponsored geofilters. About 40,000 people participate in a class each week.

With the "geofilter, we're giving people the chance to have fun, at our expense," saidJoey Gonzalez, CEO of Barry's Bootcamp. "Snapchat for a long time was being put forth on this teen / tween age group of which we didn’t have a huge purpose or following with, but that obviously started to change."

What's the benefit of the year-long commitment? Brands get access to a tool to choose between different, unlimited creatives as well as set their own payment schedule. Brands also see the numbers of views and uses of the filters.

There are two key reasons why small businesses benefit from Snapchat, said Brian Selander, an entrepreneur in residence at SeventySix Capital and formerly EVP of Whistle Sports.

"Bucket one is the ability to have the ripple effect of eyeballs across social channels," Selander said. "Two, it's still really cheap especially on a local level to be able to reach a lot of people."

Eyeball and cheapness is how Snapchat is finding their way into businesses's budgets.

While Snapchat has lost its luster to some brands -- as Digidayreported, more than 30 percent of brand accounts on Snapchat are inactive -- other companies are throwing in some spare change for sponsored geofilters. Indeed, it only costs a few hundred dollars compared to upper six-figures for video ads or sponsored lenses.

To be sure, that's not enough dollars for Snapchat to fully justify its more than $20 billion valuation and impress Wall Street. But it's a way to convince investors and advertisers that Snapchat has a reach into small, mid-sized and large businesses, just like other social networking and tech giants. Instagram announced last week it has reached 1 million monthly active advertisers. Facebook has 4 million.

Snapchat only has a few hundred businesses, large and small, signed up for annual deals. The product was released in December, so Instagram and Facebook do have the older player advantage. Snapchat is hoping its reach helps it rise quickly. More than one billion snaps with geofilters are viewed on the app every day.

Yet, not every ad resonates well with users.

"Some friends on my Snapchat feed have sometimes doodled out brand names," said Julian Gamboa, a digital marketing course instructor at UC Berkeley.

Gamboa said while he's been on spring break in Las Vegas, he's noticed his fair share of sponsored geofilters. But, they aren't all aesthetically pleasing. A Red Bull ad has a logo that takes up too much space, in terms of design, he noted.

Others are deterred from actually sharing a snap with a sponsored geofilter because the word "SPONSORED" appears in huge letters. However, that tag disappears when it is shared to the user's Snapchat Story or with friends. The change brings up a dilemma with FTC guidelines.

Sure, the user is aware of the situation before they snap a selfie with an ad, but the friends or strangers who see it are not. It's complicated and vague, Gamboa said.

"Wouldn't having the word 'sponsored' on a story signify that the brand is paying for the user's produced content?" he said. "If I attach a Red Bull geotag to my video with friends, wouldn't the word 'sponsored' make my followers think that Red Bull is paying me to produce that content? It's kind of vague, no?"

Hence, the struggle of paid and organic content of social networks. As Mashable reported last month, Instagram is testing an in-app functionality that could help eliminate the use of #ad and #spon in sponsored posts.

There's a rumor floating around Madison Avenue that Snapchat may be working on this type of system, as well, according to two sources.

Snapchat declined to comment on the matter.

"It's certainly a gray area when it comes to how clear the disclosures should be. Should tweets with branded emojis all be disclosed as ads? ... Users can easily share sponsored or promoted Facebook videos without carrying the paid attribution," Nick Cicero, CEO of social video analytics software and creative studio Delmondo, wrote in an email.

"I certainly think that Snapchat filters and lenses have done the best job of toeing the line, and advertisers certainly don't have plans to stop producing filters," Cicero continued. "It begs the question of how much disclosure do we need on social platforms?"

Partners like Barry's Bootcamp say they trust Snapchat.

"The ethos of who Snapchat is is very similar to Barry's, kind of silly, doesn’t take itself too seriously. We share a lot of the same qualities," said Gonzalez of Barry's Bootcamp. "Everything about it feels organic."