The Snap Partner Summit that took place on June 11th was noteworthy for two reasons. First – even though virtual events are the norm now – it was incredibly slick. Second, it pointed to what the future might hold, for both Snap and Augmented Reality.
Snap to Grid
Snap aims to define itself as a platform rather than an application. The foundations of this were evident in their S-1 filing in 2017. The company said they will “invest in product innovation and take risks to improve our camera platform,” and more importantly, “While not all of our investments will pay off in the long run, we are willing to take these risks in an attempt to create the best and most differentiated products in the market.”
Becoming the next platform is a once-in-a-generation opportunity and Snap’s strategy to get there can be best visualised in the grid structure shown in Exhibit A.
Each stage in this grid represents an increasingly ambitious company with plans to bring an increasingly greater slice of Snap co-founder Evan Spiegel’s vision to life.
Stage 1: What Brought Snap Here
Snap’s journey began at Stanford University in 2011, with Reggie Brown, one of its co-founders, wishing there was a way to send disappearing photos to friends. His classmate Evan Spiegel loved the idea. The concept of ‘Snapchat,’ or limited-life chats, was born under the name Pictaboo, with co-founders Reggie Brown (who would later be ousted), Bobby Murphy and Evan Spiegel.
By October 2012, Snap users were sharing 20 million images per day. By November 2013, this number was up to 350 million images per day and Spiegel had reportedly turned down a US$3 billion acquisition offer from Mark Zuckerberg. Growing spectacularly from its 2011 founding, Snap listed its IPO on March 2, 2017. Its stock closed at US$27.09 the next day, good for a US$39 billion market cap. A strong beginning but then, as it turned out, three years later, US$27.09 was still Snap’s all-time high. What went wrong?
While there were multiple reasons for Snap’s lacklustre performance, let’s narrow it down to the few big ones:
Difficulty in monetisation: Snap focused on capturing advertiser money in its core US market, trying to win money away from TV and touting better quality ad units and higher engagement with its young demographic. However, as pundits will tell you, disappearing chats do not an advertising platform make. Snapchat’s entire point was not to track you like Facebook, but teenagers were not going to put up with advertisements stuffed in their selfies!
Underestimating Facebook: Snap assumed that Facebook, with all its baggage, would not be able to launch a counter-offensive. However, it was not long before Instagram Stories copied Snap and used Facebook’s distribution to eclipse Snapchat’s Daily Active Users.
Losing users: In 2018, Snap launched a redesign that attempted to separate content from friends and brands. This was a disaster, with Snap confirming that it lost 2 percent of its daily active users — from 191 million to 188 million — in just one quarter. When Kylie Jenner tweeted that she hardly used the app anymore, Snap lost US$ 1.3 billion in market cap.
Scott Galloway declared “The End of Snap” in October 2018, and yet here we are. How did Snap punch back?
While most of us were distracted, Evan Spiegel built a new world. Today, Snap is weaving together a complex and defensible suite of products, technology, content and SDKs that position it to build the next big platform – one that truly blends the physical and digital worlds.
Stage 2: The Partner Summit
Last week’s Snap Partner Summit gave us new Snap usage metrics and more importantly, new features as Snap opened itself up to developers in a bid to expand beyond its app. Many of these new features will integrate into Snap’s Ad Platform, allowing advertisers to access Snap’s 229 million strong user base.
Impressive statistics. Impressive launches
Snap’s core demographic is 13–34 year olds and it reaches 75% of this population in the US – which is more than Facebook or Instagram. The total number of people it reaches in the US is more than Twitter and Tiktok combined. Snap also announced a dizzying array of product launches. Here’s a look at some big ones:
Minis
Snap Minis were arguably the most important launch at the Partner Summit. Minis are small third party programs that users can pull up and use right within the Chat – no switching apps. Initial launches include ticket purchase and meditation with Headspace as partner.
Lens Studio, SnapML & Snap Map
Lens Studio allows Snapchatters to create their own AR lenses. Now Snap announced that creators can bring their own Machine Learning libraries into Lens Studio, letting anyone create their own Lenses with neural networks that they’ve trained. With Local Lenses, users can have a shared AR experience anywhere in the world – from famous landmarks to neighbourhood streets.
Want to identify something you spot in the real world? The camera now supports a ‘scan and identify’ feature for visual search. A new Alexa-like Voice Scan allows you to execute voice commands (“Make my hair pink, Snapchat.”)
Snap also debuted advertising options for small businesses by including them in its interactive map and giving them free ad credits to get started.
Content
Discover is Snap’s made-for-mobile content platform and the company said it will be expanding partnerships for original content with major studios and organisations like Disney, ESPN, NBCUniversal, ViacomCBS, the NBA and the NFL. The Snap original show, “Will From Home” for example, starring Will Smith, has now been watched by over 35 million people. Snap is also expanding participatory AR content that will allow users to become part of the show.
Bitmoji Games
Snap announced Bitmoji Games, a cross-platform SDK that will allow users to take their Bitmoji avatars into other games – this is a big development that could help push Snap into other platforms.
Stage 3: A New Reality
Snap’s journey, so far, has been defined by three things:
1.To predict something non-obvious about the way the world is moving before others see it and before the market is ready for their ultimate vision
For Spiegel, the camera was going to be the way we communicate and interact with the world.
2. To insert a wedge in the market and leverage it into a much larger opportunity. (The public often ridicules or dismisses the initial wedge product)
Everyone initially dismissed Snap as a sexting app
3. To timestamp their vision, whether in public announcements or confidential documents.
This 2018 company-wide memo from Spiegel clearly lays out (parts of) the plan, and a tweet from former Snapchat employee Lucy Guo showed that Spiegel has been working on the recently-announced Snap Minis for at least four years.
Wearable Aspirations
Finally, let’s look at Snap’s wearable product, which is called Spectacles. There have been about three iterations of it so far, with limited success, but Snap has not given up yet. This would immediately spark comparison with one of the most infamous products in the category – Google Glass. However, Spectacles are not Google Glass. They are not built for Silicon Valley – they are built for the fashion conscious.
With the caveat that no one has used these things much so far — and that manufacturing physical products at scale is a lot more difficult than it looks — I suspect the outcome for Spectacles will be quite different from Glass. They look so much better than Glass and they are an order of magnitude cheaper. Much more significantly, though, Spectacles have the critical ecosystem and use case components in place. Snap’s millions of daily active users send over a billion snaps a day and watch an astounding 10 billion videos – all of which are exclusive to Snap and available for Spectacles .
To truly understand the significance of this, let’s go back to the iPhone launch of 2007. We consider 2007 to be the start of the smartphone era. There were plenty of smartphones released before (most notably Nokia/Symbian in 1996, and Blackberry and Windows Mobile in 2003). However, it was the iPhone that, thanks to its breakthrough user interface and ahead-of-its-time hardware, was able to take advantage of all these developments.
Take a good look at the image above and note that none of these features existed in a vacuum:
- Telecom providers had been building out cellular networks for two decades and mobile phones were widely in use
- iPods were hugely popular
- The web had already developed into a universe of information, accessible through a browser
A year later, Apple launched the App Store that made it possible for the iPhone to add on all of the various computing capabilities that it was lacking; the result was a single device built on top of everything that came before.
The critical point is this: Even had it been technologically possible, the iPhone would not have been, well, the iPhone, had the use cases it fulfilled and the ecosystem it plugged into, not been established first. The same could very well be true for Spectacles.
Snapchat Versus Apple
One of the most fascinating implications of Spectacles is the potential of a long-term rivalry between Snap and Apple. Spiegel has said that Snap is a camera company, not a social network. More accurately, the company is both: it is a fully contained ecosystem that is more perfectly optimised for the continual creation and circulation of content than even Facebook. What matters from Apple’s perspective is that Snapchat, like Facebook or WeChat or other apps that users live in, is one layer closer to their customers. For now that is not a threat — you still need an actual device to run those apps — but then again most people used Google on Windows, which made Microsoft a lot of money, even as it froze them out of the future.
Snap is Building the Mirrorworld
Snap has had an upswing recently, including off-the-charts 2020 Q1 earnings and user growth that saw shares up 37% in one day. Before watching the Summit, one would have thought of Snap as only a social media company, a competitor to the likes of Facebook, Instagram, Twitter and TikTok. I believe this is a short-sighted view.
Snap is not just building a camera-first messaging app; it is building an operating system for spatial information. It is building the Mirrorworld.
Wait, What?
In 2019, Kevin Kelly wrote a thought-provoking essay: AR Will Spark the Next Big Technology Platform — Call it Mirrorworld. Kelly describes a digital world mapped 1:1 with the physical world. We can interact with, experience and manipulate this digital world just as we do the real world. It will blend digital and physical, layering bits’ of infinite possibilities on top of atoms’ realness. In a limited sense, a phenomenon called Fortnite has already made clear where our collective interests lie as a species.
This could also signal a big business opportunity. The first platform of the digital age was the web. The second was social media. The third, according to Kelly, will be Mirrorworld.
Like its predecessors, this new platform will possibly bring with it an entire ecosystem. Snap will be best placed to tie this entire spatial fabric together and bring it to life – through wearables on one end and a spatial operating system on the other. Glimpses of this can already be seen through the app. A Snap user can join a persistent, shared AR world built right on top of the physical one. You and your friends can step into these worlds together, collaborating creatively and experiencing a whole new dimension of AR through features such as Land Markers and Local Lenses.
Snap has been executing a series of moves that build off of each other with the end goal in mind from the beginning. It is almost like Evan Spiegel was starting with an unassuming wedge and trading up en route to the ultimate goal.
In the quest to bring the third row of the grid to life, Snap has been dogfooding the foundations as features inside its applications. Take for example, Lenses, its first AR hit. First it opens up the tools to its community to create within Snap and then to external developers who incorporate Snap features into third-party apps. This is how the ‘first and best customer’ strategy works at Snap. Product, then platform – this is their flywheel strategy. Who would have thought that personalised cartoons would serve as a Trojan Horse into games and mobile operating systems?
Snap is in a sweet spot. It has a highly engaged base of users. It has been around long enough, so that the user base has the critical mass to drive adoption. Its users are young and geographically dense enough to pioneer a new spatial platform.
Not a Snap Just Yet
The biggest roadblock for Snap is that some of the conditions necessary for its success are out of its hands: On a macro level, this is the timing of wearable computing as well as advertising moving away from TV – although it is possible that the pandemic will accelerate these trends.
On a competitive level, one would suspect that Snap is more surprised than anyone, at how effectively Facebook has leveraged Instagram to foreclose Snap’s growth. Interestingly, Snap seems to have embraced the inevitability of its features being popular to a point of being cloned and is now actively wooing developers to use and integrate them into their applications.
The next few years will be foundational for Snap. Spiegel and team are the most innovative in tech, brilliantly creating wedges to new opportunities and creating new markets. The products will be great, and that’s what brought Snap here. We have known for thirty years, however, that great products are not always enough. If Snap gets it right, we may be looking at one of the most valuable companies of this decade. For Snap to get it right, there has not been a better time. Whilst Snaps have been ephemeral, Snap’s plans have not, and I am personally very excited about what they will do next – as an app, a platform, a wearable and possibly, an OS.
