They sell sponsored filters, iirc Snapchat is already profitable.
Think of these as fashion items. Trend-driven, fleeting, and a way for people to make statements about themselves. Many here might not have much interest in fashion, but there's no denying it is a massive industry.
As augmented reality becomes big and wearables become mainstream, filters like Snapchat offers will clearly grow in demand and value as virtual fashion goods. The interesting thing is the business model because right now advertisers foot the bill, not the consumer.
This version of the future sounds pretty horrible. One could conceivably put a nudity/porn filter on everyone... or much, much worse. The hacks are going to be epic... can you imagine your fresh new filter getting a ddos attack? Or someone sending out grotesque filters as malware...
But as a user, like with browsers, I'd always want the ability to trump what settings others might be projecting unless it is part of say, an app experience where I'm agreeing to it under the ToS. That way if someone is being offensive with something I don't like, I can decide to switch it off. And I could of course just turn off the AR experience altogether if needed.
But nudity/porn filters will almost certainly be a thing, as will something that cross-references LinkedIn data with other websites to tell you everything you wanted to know about someone including their estimated salary, where they live, how much they paid for their home, etc.
The fascinating part of the next 10-20 years will be observing how the AR ecosystem evolves, how open it will be (hah...), and how society responds. I imagine that like most major shifts in communication and technology, young people will adopt this stuff instantly, and old people will push back because it is offensive, or they can't control it and enforce their viewpoints. History tends to repeat itself in that regard.
Remember when Zynga and Farmville were the best thing since sliced bread? Remember the dotcom days when companies were worth millions(Billions) based on potential? That is what is happening here. There is no hook to keep these users for the next 5 to 10 years. Something "cooler/hipper/awesomer/badasser" is being coded right now...