Snap – Augmented hopes.

Gaming makes more sense than video.

• Snap’s beleaguered attempts to move beyond its instant messaging service have taken another turn with a potential move into gaming.
• Given that the Digital Life segment of gaming is the one segment where there is no dominant operator, Snap has a much better chance of succeeding here than elsewhere where it is up against much bigger and well-established rivals.
• Snap looks set to launch a gaming platform as part of its service towards the end of this year in an effort to get its users to spend more time within its services.
• The rationale for this is obvious as RFM research has long demonstrated that time spent is strongly correlated with an ecosystem’s ability to generate revenue.
• Hence, the more time spent that Snap can address with its services, the greater its total addressable market will be.
• This is exactly the issue that Twitter is still grappling with where there has not been much success to date.
• Time spent is particularly relevant for those ecosystems that monetise their services through advertising as opposed to subscription or hardware.
• Given that a lot of Snap’s innovation to date has focused around the camera and augmented reality, I expect that this will be the focus of its new platform.
• Hence, the games released will most likely be more like Pokémon Go or Lego’s recent demonstration at WWDC rather than Clash of Clans or Candy Crush.
• On this front, Facebook is already experimenting with casual multiplayer games in Messenger, meaning that Snap’s options here already pretty limited.
• However, Snap does have one of the best user demographics for gaming as well as a willingness to try new things which may help offset the fairly-limited appeal of AR gaming.
• Gaming is a big segment, and to date only Pokémon GO has really been able to make a sustainable business from AR-based gaming.
• I still believe that AR-based gaming will not really come into its own until the technical issues around AR head units have been solved to make them acceptable to the consumer segment.
• That being said, Snap has a good history of thinking of innovative and engaging ways to entertain its users so it may have a trick or two up its sleeve.
• The real issue will be developers as it will need to convince developers that it is worth writing their game to Snap’s platform rather than the platforms of others who can offer access to a much larger audience.
• I think that Snap has the right idea when it comes to extending into the Digital Life segment of Gaming, but its focus is likely to be pretty narrow raising the question as to whether it will achieve the scale needed to affect the its bottom line.
• I continue to believe that Snap is too small and too unprofitable to make it on its own and so I expect that it will end up being acquired by one of the larger players.
• Google would be the most logical acquiror as, following the failure of G+, it has no real presence in the Social Networking, Instant Messaging or Gaming segments of Digital Life.
• I expect Snap’s disappointing run as an independent company to continue.

Reply to this post