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Snap unveiled a slew of new products for users, developers, and creators at the company’s first-ever Partner Summit last Thursday — including an anticipated in-app gaming platform called Snap Games, a new ad network called Snap Audience Network, and a new slate of original shows as part of its Snapchat Originals premium video push.
What it means: The new features could help Snapchat capture more time and attention from its present user base and boost its appeal to advertisers.
- Snap Games. The in-app gaming platform will feature original games that will be available only on Snapchat, and only through group chats. Snap announced six new original and third-party games, which rolled out on the app last Thursday.
- By combining messaging and mobile gaming, Snap is laying the groundwork for the app to increasingly become a “virtual hangout” or “third place” where Snapchat users will go to not only send each other snaps or passively engage with media content on Discover, but also hang out with friends in fun, virtual settings. For example, one of the incoming slate of games is "Bitmoji Party"— an original Snap game that lets users compete as their Bitmoji avatars, similar to how 10 million Fortnite players "attended" Marshmello's in-game concert.
- These types of games would aim to replicate the rampant success of free-to-play, immersive, multiplayer games like Fortnite “that double as online communities,” fueling massive engagement (longer session lengths, more users) and greater willingness to buy virtual gear (higher in-app purchases). On that note, Snap will also be rolling out two third-party battle-royale games — the same genre as “Fortnite” and “Apex Legends.”
- Snap Games will feature advertising — likely in the vein of Snap’s six-second, unskippable video ads — but in-app purchases could also be integrated later on, adding another potentially significant revenue stream. For example, Fortnite generates all of its revenue from in-app purchases of digital goods, which helped parent Epic Games bank $3 billion in profit in 2018.
- Snap Audience Network. The new ad platform will enable advertisers to extend their campaigns beyond Snapchat to reach audiences on other third-party mobile apps. Through the tool, third-party developers can create full-screen vertical video ads, which Snap will then sell on behalf of the developer in exchange for a cut of the ad revenue.
- Snap likely hopes that the promise of greater reach will attract more advertisers to the platform, and help it rapidly scale the number of advertisers and ad dollars flowing to the platform. That could include smaller brands that might not have the resources to devote to ad sales at scale.
- Targeting SMBs with more open ad products could fuel more significant advertiser uptake. For example, Snap successfully lured a greater number of smaller advertisers when it opened its self-serve platform in May 2017. And Facebook, which has had its own Audience Network since 2014, now has 7 million advertisers buying on the platform, up from 6 million in November 2017 and 5 million in April 2017.
- Original video content. Snap announced its latest slate of 10 new premium original shows, both scripted and unscripted. Snap continues to double down on premium, mobile-first video after launching Snap Originals — a slate of 12 episodic originals — last October. Some of those shows have found an audience: For example, “Dead Girls Detective Agency,” reached more than 14 million unique viewers, with more than 40% of them watching the entire season.
- More high-quality, episodic series on the app could further solidify Snap's reputation as a destination for mobile-first shows, particularly if those shows make cultural waves. Snap stands to generate more revenue from Commercials — six-second, unskippable ads that run in episodes. Ad revenue generated from premium content more than doubled in Q4 2018, per Spiegel.
The bigger picture: New products are part of Snap’s broader agenda to boost its business by encouraging deeper engagement among its core base of loyal users — even if it never scales usage.
Snap faces growing pressure to prove its value to advertisers in the bruising aftermath of its botched redesign and seemingly endless wave of executive departures over the past year.
- Snapchat hasn’t been able to scale its usage beyond 200 million, much less to Facebook-like heights: Daily active usage now sits at 186 million users as of Q4 2018, down slightly from the app’s peak of 191 million in Q1 2018.
- We continue to view Snapchat as a niche product for a niche audience chiefly made up of very young people: Snap’s core strength — and fundamental to its pitch to advertisers — has been its young (mostly Gen Z) user base: 90% of US 13- to-24-year-olds use Snapchat, per comments by Spiegel last week.
- But the threat of Instagram stealing the attention of Snap's key demo might have some advertisers feeling that they can easily or better reach that audience on Instagram: 85% of teens use Instagram at least once a month, supplanting Snapchat in the top spot (84%) for the first time last year, per Piper Jaffray.
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