Snap (NYSE:SNAP) stock collapsed after its first-quarter earnings report. The share price is now down about 72% for 2022.

Snap reported a net loss of $359 million, 22 cents per share fully diluted, on revenue of $1.06 billion, on April 21. The result sent shares down 43% in a single day. Snap was due to open June 22 slightly below that day’s closing price, at $12.50, and was trading later around $13.

This price is still not cheap. The market cap remains at $21 billion on expected revenue under $5 billion. The social media company born around sharing pictures that are automatically erased now hopes to stage a comeback around augmented reality and paid services.

Analysts remain excited, but investors are skeptical.

SNAP Stock and Getting Paid

It’s hard to collect money on something you offer free.

Snapchat Plus is trying to do just that. The product, now in  beta testing, will cost about $5/month. But the company has been coy on specifics.

Some features were revealed by researcher Alessandro Paluzzi on Twitter (NYSE:TWTR). This illustrates the problem. Some features read like those a stalker might seek, like a “best friend” identification and the ability to see where that friend has been. Others are just ego strokes, like a special badge for the user’s homepage.

CEO Evan Spiegel insists this is the future, not just for Snap but for Twitter as well. He called it a “super app” approach, comparing it to Tencent’s (OTCMKTS:TCEHY) WeChat, a Chinese app combining chat, video and commerce features.

Spiegel co-founded Snap in 2011 and its IPO made him a billionaire at age 25. His net worth is still estimated at $3.2 billion by Forbes.

One App to Rule Them All

Spiegel’s predictions point to an era where apps compete to become the one app people use, discarding the rest.

That would put Snap in direct competition with Meta Platforms (NASDAQ:META), Tencent, and Twitter, all of which are much bigger. That may be why analysts have cooled on Snap, with two of 31 now telling investors to sell it, even at today’s low, low price. Even some with a buy rating have lowered their price targets drastically. UBS sees it at $17/share in a year.

Spiegel says Snap’s augmented reality features will make it a winner. This lets creators build things like the old Pokemon Go game, computer-generated pictures overlaid on the real world. The result, for business, is said to be hands-on training delivered in real time. For marketers, it’s supposed to create new ad opportunities, a digital arms race.

The problem is the new features require new client devices, like Snapchat’s own Spectacles. These have not flown off the shelves. Pokemon Go put pictures inside users’ phones and the service was free.

The Bottom Line

Investors understand the economics of a free social network.

Paid technology services look like riskier investments.

Analysts expect Snap to report another loss for the second quarter on July 21, with some revenue growth to $1.22 billion. Even that may not provide lift to the shares.

What Snap needs is a “killer app,” something that causes millions to give it cash for hardware and services. That could be a business application that delivers a solid return on investment, or a consumer application that delivers enormous sales. It could be the creation of a new multimedia star, or an existing act earning fame and cash from using its service.

This might all happen. But there’s new risk in Snap that didn’t exist a few years ago. To regain the favor of investors, Snap must not just change the narrative, but prove its new direction can be profitable.

On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack.