Social Media

Snapchat hopes for revenue boost with new geofilter

Snapchat payment options for location on map
Source: Snapchat

As rival Instagram makes waves in its effort to boost advertising dollar bragging rights, Snapchat is making revenue moves of its own.

Snapchat is already working with big advertisers such as American Express, McDonald's and Hyatt Hotels. But this week, the picture and video-sharing application — which has more than 100 million daily active users — said it will allow users to submit their own customized filters for a specific location on a map. These so-called custom geofilters can now be purchased by users for as little as $5.

A representative for Snapchat told CNBC it will limit most geographical areas to just six or seven geofilters, so users aren't overwhelmed with too many options. Previously, users have been able to use location-themed filters for a neighborhood, city, or even an entire country. Snapchat said it's received more than a half a million user-submitted filters.

Market watchers classified the initiative as a key move in the ongoing social media monetization game, and comes on the heels of a CNBC report that Snapchat has been forced to cut its ad rates with major advertisers.

Read MoreSnapchat's ad rates drop as brands find problems

Debbie Williamson, an analyst for eMarketer, thinks the new model will be used by some users, but its appeal will be likely for either a limited event or small business. "It's instant branding, and more importantly, it's tied to a specific location, so you're not paying to reach people who are on the other side of the world" or country, she said.

She said it's an efficient way of targeting an audience when compared with other advertising methods. "It shows the company is being thoughtful about what its users want," Williamson added.

Snapchat on cell phones
Al Drago | CQ Roll Call | Getty Images

Earlier this week, Instagram, the Facebook-owned platform, announced it's reached 200,000 monthly active advertisers, reaching more than 400 million active users. The number is a huge jump from the just "hundreds" it said it had last summer. Instagram opened its self-service advertising platform last September, which allows smaller brands to advertise at much lower rates than major companies.

Read MoreInstagram now has 200,000 advertisers

While Snapchat is not yet in that league, the social network still touts its own share of big brands.

Snapchat told CNBC that "our strategy previously has been to work with blue-chip repeat companies," and listed examples including General Electric, Toyota and Sony.

Ninety percent of the companies' top advertisers are repeat advertisers, a group Snapchat said it will continue to focus on.

The social network's advertising platform is only roughly 1 year old, and on-demand geofilters mark the beginning of the consumer focus, which skews young. More than 70 percent of the company's users are under the age of 35, according to ComScore data, which is why analysts say the move to separate big advertisers from average users was a logical move.

"Snapchat's audience is predominantly young people, so unless your business targets young people, it may not make sense to advertise there," eMarketer's Williamson said.