It's not about the size of the userbase; it's about business models. They burned cash to acquire users, but once they wanted income they too have gone the advertising route. This leads to the dilution of the core experience as you've pointed out: fudged timelines [1], denser advertising, backporting of missing social networking features, leading to networks that are largely interchangeable [2].

Snapchat can't really afford to be interchangeable with Instagram, because Facebook actually knows how to persuade advertisers to keep selling ads, while Snapchat just relies on its perceived clout among a coveted demographic, providing very few mechanisms for advertisers to gauge their ROI [3]. Sooner or later, advertisers will wisen up and pull out of Snapchat, making their business model crisis all the more acute.

Snapchat is one of the best-positioned companies to actually trial different business models for their app: they have a respectable install base, their platform is still sticky and desirable enough to maintain a sizeable userbase for some time, and their preexisting userbase is aging into being able to spend some money. Defection to Instagram isn't nearly as much of a threat as many make it seem: most Snapchat users are already on Instagram as well, so as long as they continue to engage with Snapchat, all is not lost.

Their map purchase was an effort to pivot the product's monetization back to hyperlocal factors, and solidify the idea that your Snapchat friends are part of your close-knit circle. Snapchat could be a better Foursquare, but it's not quite there yet.

[1] https://news.ycombinator.com/item?id=12191435 [2] https://news.ycombinator.com/item?id=13168804 [3] https://news.ycombinator.com/item?id=15050410