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The social media company finds itself outspent by bigger rivals—and needing to beckon a new generation of young people.

For nearly as long as Evan Spiegel has run Snap Inc., his big bet has been on Spectacles, the company’s augmented reality glasses. All together, he has poured $3 billion into the effort—a fraction of what Mark Zuckerberg at Meta Platforms has invested in wearable technology, but a major expense for a company of Snap’s modest size. Spiegel still hasn’t seen a blockbuster hit.

Spiegel may be ready to ask for some help. Snap has begun to discuss ways to raise outside money for its Spectacles project so it can compete with deeper-pocketed rivals like Meta, according to a person with knowledge of the conversations. The company has considered possibilities such as raising money from outside investors to fund the development of Spectacles, much as Alphabet has done for its Waymo robotaxi subsidiary. It has also discussed a nuclear option: spinning off Spectacles—something that would greatly pain Snap, since its core Snapchat app shares augmented reality technology with Spectacles.

The discussions reflect a broad reality for Spiegel: Snap is in an unsteady position and competing with far more powerful social media rivals like Meta and TikTok. Snapchat does remain a popular messaging platform for many young people, and the company has carved out a place for itself within the creator economy through features like Spotlight, a TikTok competitor. Its subscription service, Snapchat+, has doubled to nearly 16 million subscribers over the past year, contributing to an annual revenue run rate from the offering of $700 million.

But another worrisome problem could be on the horizon. Senior leaders are concerned that Generation Alpha—those currently between the ages of one and 15—so far aren’t adopting the app the same way their Gen Z and Millennial predecessors did, according to two people familiar with the internal discussions, which haven’t been previously reported.

Meanwhile, a slew of departures over the past year or so has thinned out Snap’s leadership team. Patrick Harris, who ran the company’s North American business, bowed out in March. In June, Colleen DeCourcy, chief creative officer, left, and so did David Levenson, the company’s director of growth. July and August brought two more exits: Darshan Kantak, revenue product chief, and Eric Young, engineering chief. To fill Young’s spot, Snap’s other co-founder, Bobby Murphy, will assume oversight over the engineering team, along with chief business officer Ajit Mohan.

And as for the AR effort, Snap hasn’t yet progressed to doing a formal fundraising process to line up investors, but it has existing relationships with sovereign wealth funds that could fund such a deal, according to the person with knowledge of the situation. (When asked about the possibility of raising outside capital for the AR glasses, a Snap spokesperson said the company sees its free cash flow as its “most capital efficient option” for funding such a project.)

All the turbulence surrounding Snap has hit its stock, which has fallen sharply over the past few years from a high of more than $83 in 2021. Earlier this week, it traded at a little over $7.

Earlier this month, Snap reported lackluster second-quarter results. The company’s ad revenue increased just 4%, in stark contrast to double-digit growth from its much larger rivals including Meta Platforms and YouTube.

“It’s very hard to reconcile the trajectory of Snap’s ads business,” said Mark Shmulik, a senior analyst at Bernstein. “Everyone else’s numbers show acceleration.”

Lately, Snap has worked to keep influencers using its app with new ways to make money through its lucrative ad-revenue sharing program, and other initiatives like Snap School, where it invites creators to its Santa Monica, Calif., headquarters and offers them tips and pointers for growing their audience and creating content.

Snap has done over 300 Snap School sessions. Alyssa McKay, a 25-year-old creator who lives in New Jersey, has attended some of them, and they have helped her think of new approaches to chronicling her life for 2 million Snapchat followers.

McKay posts more than 100 disappearing Stories a day to Snapchat, sharing virtually every part of her day—from her breakfast to a step-by-step skin care routine. She’s made more than $2.5 million from Snapchat over the past three years, according to her manager.

“With Snapchat, it’s fairly raw, unedited and filmed in the moment. It definitely gives the audience a more personal look into your life,” McKay said. She was comparing it to Instagram and TikTok, where creators spend more time editing and curating their photos or videos.

The company’s pitch to creators like McKay and advertisers alike is that it’s a key place to reach young people. Snapchat often touts that it reaches more than 75% of 13- to 34-year-olds in many parts of the world, including the U.S. While it has maintained a hold over Gen Z for now, failing to capture the next generation of younger users could spell serious trouble for Snapchat. Users have typically been aging out of the app, while they generally stick with rival apps like Instagram and TikTok as they get older.

Within Snap, there’s concern among some employees that Generation Alpha, generally considered to be born between 2010 and 2024, may be using smartphones less than prior generations, one potential reason for slower adoption of Snapchat, according to people involved in these internal discussions. Unlike previous generations, Gen Alpha also faces stricter school restrictions on phone and social media usage, which eats into their overall screen time.

At the same time, some of the features that made Snap different, such as disappearing messages or Stories, are now widely available on other services. While Gen Alpha is still using Snapchat, many of its members aren’t using it every day as previous generations did, leading to a drop in the crucial daily active user metric, the two people said.

To boost growth in North America, where Snapchat lost daily users in the second quarter, Spiegel told Wall Street investors earlier this month that the company is thinking about how to encourage users to share more content with each other on the app, but he didn’t offer any specifics. He said people are moving from posting their own disappearing Stories for their friends to sharing other types of content with friends, such as sending them videos or Stories to start a conversation.

Snapchat’s TikTok competitor, Spotlight, has shown signs of life. It now makes up 40% of the time people spend watching content on the app. It averaged 550 million monthly users at the end of June.

Even so, the feature lags behind competitors like Instagram Reels, YouTube Shorts and TikTok in terms of viewership and showing users a feed of relevant and hyperpersonalized videos. For example, 2.5 billion people a month watch YouTube Shorts, while TikTok has more than 1 billion global users.

And the company hasn’t successfully been able to turn large numbers of average users into influencers with their own wide following in the same way platforms like Instagram and TikTok have. Doing so could boost its advertising business. Snapchat’s core usage is still private messaging, but encouraging more of its users to spend more time watching content could bolster its ad business. (Snapchat has also started earning money from private messaging by inserting ads in a user’s chat inbox, which the company sees as a significant revenue opportunity.)

Right now, Snapchat may just not have enough content to effectively personalize Spotlight. On TikTok, for example, users react to other videos and make their own videos that piggyback off trends on the app. The volume of content they generate makes it easier for TikTok to serve people personalized videos. Over at Meta, Instagram is seeing a boost in engagement from friends directly messaging each other short-form videos.

Snapchat has faced some bumps in its content efforts. In April it abandoned a redesign effort, known as “Simple Snapchat,” after working on it for nearly a year. That redesign would have put Spotlight videos and other content more front and center by simplifying the app down to three tabs from five, including one with a TikTok-like feed of videos from creators and publishers. (When asked about abandoning the redesign, a spokesperson defended the decision by saying Snapchat’s users are “very passionate” about its current look.)

Jack Settleman, a sports-focused creator who has been posting on Snapchat since 2017, offered a stark assessment of Snap’s standing. “Culturally, it has no impact,” he said. “It’s almost siloed into its own little world.”

With its core business under significant pressure, Snap has a lot riding on Spectacles.

Bigger rivals like Meta, which has a monster ads business, can stomach spending billions on experiments in artificial intelligence and virtual reality goggles. “You have to earn that right,” said Shmulik, the Bernstein analyst.

A major reason why Snap has been able to sink as much money into Spectacles as it has is because co-founders Spiegel and Murphy have supervoting shares that give them control of most matters presented to shareholders. And they are unapologetic about using that control.

“If investors aren’t aligned with our long-term vision, then they can sell our stock and go buy another stock where they see more long-term opportunity,” Spiegel said at an event hosted by The Information in June.

None of the previous three iterations released to the broader public has taken off with customers, causing some to wonder if any ever will. Versions of the fifth generation released to developers still look large and clunky, though Spiegel has teased that the sixth iteration made public next year will be more lightweight, with see-through lenses that will allow users to browse and stream on the go.

The actual experience of using AR glasses like Snap’s still feels odd to many consumers, argues one former senior Snap employee. “It’s been 10-plus years that a lot of people have been working on it, and it’s still not natural,” this person said, describing the complicated hand gestures you need to learn—and master—to use the gadget.

Snap, for its part, says it has a headstart on the complicated technology and the recent rush of interest from other tech players is confirmation that it made the right gamble. “I think today if you look at this investment area…people’s realization [is] that this is the future form factor for computing,” Spiegel said in June. “That’s given us a lot of conviction to double down even though it is expensive.”

Despite all the risks, Snap has already “bet the farm” on Spectacles, said one former employee: It’s the device that could give the company a real boost of growth.

“It’s a big bet, right—with huge competitors—but if it wasn’t for that, I don’t know what investors would see in this platform or what the future would be,” this person said.“It just becomes another midsize media company.”