Snap Inc. – Facebook dependent.

Snap needs Facebook to slip to mount a comeback.

• Snap’s 1^st developer conference revealed a move into gaming as well as a strategy to prevent the rampant copying of its innovations that have caused it so much trouble.
• I don’t think that this is going to trigger user numbers to start really growing again but it may enable Snap to better monetise the users that it does have.
• Snap really needs Facebook’s users and advertisers to begin leaving the platform before it can really capitalise on these new initiatives.
• The new initiatives are:
  • First, SnapKit which is an SDK that allows developers to embed the popular Snap functionality directly into their apps.
  • This was launched in June 2018, but Snap has added App Stories to this which effectively allows 3^rd parties to create white label Stories rather than make an inferior copy.
  • This is a double-edged sword in that it will drive some traffic away from Snapchat to 3^rd party apps but at the same time, Snap is running the Stories function.
  • Taking traffic from the Snapchat app reduces the advertising opportunity and also Snap’s opportunity to interest users in using its other Digital Life services (see below).
  • However, copying has been a blight on Snap’s performance and by making it freely available, Snap has removed the incentive to copy its functionality.
  • The app developer gets a better Stores function and shares data and advertising opportunities with Snap in return.
  • Snap is also making its advertising monetisation system available to 3^rd parties such that they can easily use advertising to monetise their apps paid for by sharing some of the revenue with Snap.
  • Tinder, Fitbit, Netflix, GoFundMe & Venmo are early adopters of this move to make functionality available to 3^rd parties and serve as good landmark adopters.
  • Second, Snap Games: After years of no one wanting to address gaming on mobile devices (see here), now everyone seems to be getting in on the act.
  • Snap is the latest to move in this direction with a replication of WeChat gaming within Snapchat.
  • Once again it has lined up a pretty good stable of developers at launch with Zeptolab, Zynga, Spry Fox and a few others making their games available within the Snapchat app.
  • Snap is emphasising the multiplayer aspect of gaming which RFM has long found to be the essential step in developing a thriving community from which to earn revenues.
  • This has suddenly become a crowded space meaning that Snap’s offering will need to be original and compelling to win traction.
  • Third, content: Snap also announced more original content designed to be watched in small doses on mobile phones.
  • 10 new shows and the renewal of 3 of its previous shows were announced which are shot in a vertical format to improve the viewing experience on a mobile device.
  • This is an attempt to expand Snap’s coverage of Digital Life to Media Consumption, but it will need to generate much more traction if it wants to have a sustainable position in this segment.
• Snap has clearly put a lot of thought into solving its problems with the copying its innovations as well as its growth issues due to its weak coverage of the Digital Life Pie.
• I think that these all represent moves that the company had to make but whether they have come too late remains to be seen.
• Facebook is currently the whipping boy of the press, but its users and its advertisers have yet to desert the platform as quarterly reports have so far shown no fall-off.
• Should this happen, Snap is well positioned to mop up some of the deserting users but until then, it is still Facebook’s game to lose.
• Snap’s stock has recovered well, but I am wary of it going much higher until some of these initiatives show sign of bearing fruit.