Verizon and Snap ink 5G AR deal

Verizon has announced a tie-up with Snap to deliver augmented reality (AR) features and experiences in the 5G labs.

As part of the agreement, the duo will work in Verizon’s 5G labs to create AR experiences for live experiences and marketing initiatives. The deal will also see the Snapchat app preinstalled on some Verizon 5G devices, while the telco will also receive marketing placements within Snap Originals video series.

“5G will change the way people live, work and play and we’re partnering with leading companies like Snap Inc. to create unique experiences and new offerings,” said Frank Boulben, VEP of Marketing & Products at Verizon. “Our strategy is to partner with the best brands to ensure our customers have exclusive access to cutting edge technology and services.”

“Major advances in high-bandwidth experiences are fueling the future of augmented reality,” said Jared Grusd, Chief Strategy Officer of Snap. “We are thrilled to partner with Verizon to move the industry forward through the development of creative and innovative 5G experiences on Snapchat.”

While many in the industry have been focusing on enterprise customers to drive genuine innovation in a 5G era, the consumer-orientated telcos in the US are attempting to squeeze out benefits for the general public. AR, alongside virtual reality, is a usecase which has long been touted as a game-changer in the 5G world, though reservations still persist.

For Snap, this is a deal which lives up to the promise made in recent earnings calls.

“We have a significant lead in augmented reality due to the camera-first nature of Snapchat and the frequent usage of our camera, and we believe that smartphone-based augmented reality will be an important driver of our business over the coming years,” said Snap CEO Evan Spiegel last month.

“We have been investing heavily in tools like Lens Studio to help creators build augmented reality experiences and evolving the ways that we distribute Lenses to our community through products like Scan and our AR Bar. Even though augmented reality is a relatively new technology, it provides real utility for our community and real results for our advertisers, making it a natural growth opportunity for Snap.”

Although some of the older generations might be confused by Snapchat as an application, it is started to gather momentum. It is now one of the most popular social media apps worldwide, while the revenues are started to build-up. During the last quarter, revenue increased 50% year-over-year to $446 million, still someway off its rivals but growth is still growth.

Snapchat looks like a real business after all

We don’t understand it, but perhaps we’re not supposed to. We do understand numbers though, and the Snap financials are looking stronger each year.

For those who getting a bit ‘longer in the tooth’, Snapchat might look like nothing more than a reel of confusing inside jokes which the younger generations are keeping well beyond arms’ length. It seems like nothing more than a messaging app for the paranoia filled narcissists, but few investors will care about perceptions if the numbers keep heading in this direction.

“We’re proud of the results that our team delivered this quarter,” said CEO Evan Spiegel. “We added 13 million daily actives users, our highest net adds since the second quarter of 2016, bringing our daily active users to 203 million.

“The average number of Snaps created every day grew to more than 3.5 billion this quarter, and average time spent per user was over 30 minutes per day.

“Our revenue growth rate accelerated both quarter-over-quarter and year-over-year to 48%, yielding $388 million in total revenue for the quarter. This growth in our community, engagement and revenue is the result of several transitions we completed over the past 18 months.”

Total revenues reached $388 million for the three months ending June 30, growth of 48% compared to same period in 2018, while net gain on subscribers exceeded numbers expected by analysts. Snap might not be in profit just yet, operating loss totalled $304 million, but the numbers are all heading in the right direction. Snap does seem to be following the traditional route of Silicon Valley in this sense, and profit might not be that far away anymore.

Those who invest in Silicon Valley certainly have to be brave. The latest generation of businesses to emerge insist on significant backers to pump in huge amounts of capital with the vague hope of profits on the very-distant horizon. The early years are focusing on growth, doubling-down on product innovation to cut through the noise in a very competitive segment. Profits are an afterthought, but the likes of Google, Facebook, Amazon, Netflix and Twitter prove an oasis can emerge after years of traipsing through the baron deserts.

In fairness to the Snap team, its innovations are often stolen by other platforms, somewhat of a complement in today’s world. The product itself does not much resemble the app which hit the market in 2011, and while there might have been complaints about updates forced on the user last year, there do seem to be rewards.

Daily Active Users (DAUs) over the last three months increased to 203 million, up from 190 million in the previous quarter and 188 million in the same period of 2018. The average number of Snaps created every day also grew, this time totalling more than 3.5 billion on average over the three months.

Perhaps most importantly however is retention is increasing. There have been fears in the past that Snapchat would be nothing more than a passing fancy, though the team saw more than a 10% increase in the retention rate of people who open Snapchat for the first time.

The appeal of this app to the younger generations is unquestionable, Spiegel claims 75% of the 13 to 34 year-old population in the US is active on Snapchat, but questions remain over the commercial viability of the platform but also retention rates for older generations.

On the advertising side, this is an area which has certainly improved. Like Twitter last year, Snap has made it easier for advertisers to create content for the platform but also manage campaigns. This might sound simple, but for developers who have traditionally focused on user engagement this could have been an afterthought. It appears there is becoming a much healthier mix of user engagement and advertising appeal on the platform to ensure revenues can continue to grow.

The team is also making encouraging progress on augmented reality, a technology which promises a lot from both engagement and revenue perspectives. Few have been able to make this technology work to its full potential, but the Snap team have proven numerous times over the last few years they are leaders when it comes to innovation.

The Snapchat app might be an enigma when it comes to the older generations, they might not understand why it is appealing, but who are they to second-guess why. Numbers speak for themselves, and while Snap is a long-way from profit, the trends are certainly heading in the right direction.

Snap Q3 2019

Snap has a minor dip but can it learn Facebook’s lessons?

Snap has reported its numbers for the second quarter, and while the news is not wall-to-wall blockbusters, there does seem to be long-term confidence in the business.

For the first six months of 2018 Snap brought in total revenues of $492.9 million, up 49% year-on-year, while the net loss narrowed from $2.6 billion to $739 million. This might weigh heavily on the spreadsheets, but it wasn’t too long ago when Facebook was also haemorrhaging cash. The walled garden business model takes time to develop, and Snap is heading in the first direction after years of looking like nothing more than an expensive procrastination tool for teenagers.

“I’m really excited about the progress we’ve been making at Snap, and optimistic about the opportunities ahead as we continue to improve our team, reinforce our culture and invest in innovation,” said CEO Evan Spiegal. “We have focused a lot of our time and effort this past year on developing our team, culture and leadership that we need to rapidly scale our business.”

Perhaps the most worrying sign from the announcement is the Daily Active Users (DAUs). This number increased 8% to 188 million in Q2 2018, compared to 173 million in the same period of 2017, though it was down 2%, three million users, sequentially. Trends are heading the right direction year-on-year, so this might be nothing more than a blotch on a single page in the story, at least that it what Spiegal believes. Most importantly, investors seem to buy the explanation as share price barely moved.

The dip has been blamed on the redesign launched by the team earlier this year, which was not received on the best of terms by users. This was not a successful initiative by the team, and disastrous feedback led to a complete rethink. Spiegal highlighted the main frustrations have been addressed and corrected. It was a necessary move though, it took the users from engaging exclusively with friends to introduce ‘publisher stories’, and the most turbulent waves to seem to be in the past.

Aside from innovative partnerships, this does seem to be one of the growth factors. In terms of monetization, it does seem to be one of the simplest routes to market. It might not be the blockbuster display advertising which Facebook and other social media platforms are used to, but it is a more engaging way to monetize the user base. The number of users who watch publisher stories every day has grown by 15% over the course of 2018, partly fuelling the 35% increase in ARPU to $1.40.

The ARPU statistic is an interesting one here. $1.40 is not the end of the world, though it is quite a bit down on Facebook’s worldwide average of $5.97 and significantly shorter on the $25.91 it makes from users in the US and Canada. The next couple of quarters might give an indication of what type of platform Snapchat will eventually become.

Facebook is the master of monetizing the walled garden business model, though it has come at the expense of engagement recently. The reason youngers generations are favouring platforms such as Snapchat and Instagram over Facebook is because of how much commercial activity there is. Facebook got greedy and it has been affecting the future prospects of the business as user growth in key Western markets stalls.

Snap has to learn a lesson here. Making the platform overly commercialised, like Facebook has become, will be good for the spreadsheets for the next couple of quarters but the long-term impact could be detrimental. Once you lose the interest of the user, it will be tough to regain; there are plenty of other options on the internet to keep them busy.

Fortunately, Snap does seemed to have developed a solid culture of innovation. The short form videos are performing very effectively, 11 ‘Shows’ reached a monthly audience of over 10 million users, up from 7 in Q1 2018, while other features have been copied by competitors. The mentality does seem to develop new features with entertainment in mind, not direct monetization. Cash will come as long as you keep the users busy in the garden.

Users will define the prospects of the business and engagement will have to be maintained. Should Snap be able to keep greedy investors at bay, not sweating advertising revenues out of the user too intensely, this will certainly be a company in the money.

Snap set to have another crack at the specs market

A FCC filing from Snap indicates the social media firm is set to have another stab at making its connected glasses work, after a tepid response to the first go.

The filing is protected by various confidentiality requests, though it indicates Snap is working on a ‘wearable video camera’ with ‘spectacles’ branding and ‘model 002’ on the packaging. The product will also be compatible with the 2.402-2.48 GHz Bluetooth and 2.412-2.462 GHz Wifi frequency ranges. While there is still a bit of ambiguity, most would come to the fair assumption Snap is launching a new and improved range of Spectacles.

Perhaps it was a product ahead of its time or the team hadn’t worked out all the bugs, but the first attempt was less than successful (putting it mildly). The product was launched with a notable advertising campaign and promised great things to the industry. Unfortunately hundreds of thousands of products are reportedly sitting unsold in a Chinese warehouse as the product fell faster than a lead balloon.

This was an unfortunate development for Snap and the industry on the whole, as the product has the opportunity to bridge a couple of divides between the digital dream and reality. When the product was initially launched in 2016, connected products were limited. A lot has happened over the last two years to normalise the concept.

Snap has a unique opportunity in the tech space to make some positive waves here. It has a young audience, many of whom are digitally native and therefore more accepting of new ideas, and a direct usecase. You snap the content on your glasses and directly upload to the app. Few other brands have the content platform to build such a logical link, as few other platforms have built their message around user-generated content.

Should the idea of connected glasses take off, new doors are opened for wearables, as well as augmented reality and immersive content. This is where this sub-sector has struggled; normalising the hardware. Perhaps one of the reasons VR and AR have stalled over the last couple of months is because they are asking the consumer to take too large a step forward. Users like to be drip fed incremental advances, as progress can be a scary thought. Asking consumers to go from yesteryears normality to the fully immersive experience, where the user is essentially removed from the physical world, might have been too much.

The industry should be looking at Snap and hoping for a win here. Get the hardware out onto the market and then applications can be built into and on top of it. This is how the smartphone became successful, applications were limited in the early days, but as soon as mass market penetration was achieved all sorts of wonderful ideas, such as online dating and digital banking, became normalised. This might just be the first and logical step for the VR and AR world.

The one question which remains is whether this is an excellent example of the fail-fast business model, or if it is simply Snap throwing good money after bad. Only time will tell.

Snapchat feels the pain of the Jenner Effect

Earlier this month Snap wowed the world with some decent financial results, boosting shares by 25%, but negative feedback on its interface redesign and a damning tweet from Kylie Jenner have had the opposite effect.

This is a demonstration of how delicately balanced internet companies are and perhaps demonstrates why larger organizations are paranoid about doing anything too drastic when it comes to updates and upgrades. A good move would go relatively unnoticed, but a bad move can be disastrous.

The most vivid demonstration of this perilous journey for engagement, and maybe also the most amusing, can be seen below in a tweet from Kylie Jenner.

For those who don’t know who Kylie Jenner is, she is one of numerous celebrities who are famous for being famous and little else, who surged into the public eye as a result of reality TV. Jenner currently has 24.5 million followers on twitter, 59,000 of which decided to retweet the above message and while 311,000 liked it. Over the course of the last 24 hours, Snap’s share price declined more than 6%, wiping off more than $1 billion.

Of course, these 18 words declaring abandonment have not alone brought the misery to Snap. The company recently released an update to the app, which has proved incredibly unpopular, with many user complaining the features are more difficult to access or use.

At the time of writing, 1,234,420 have signed a petition on to try and convince the company to go back to the good old interface. While some might wonder what all the fuss is about, some have seemingly taken very personally. “The new Snapchat update sucks ass,” Sue-Anne van der Merwe wrote. “F*ck this update,” cried Taylor Richardson. “Snapchat is ASS and needs to change back,” pleaded Alahna Ramsdell.

How fortunes have changed. Three weeks ago the company released its latest financial performance with sales hitting $285.7 million, an increase of 72% year-on-year. Share price rocketed up 47%, but the redesign and the Jenner Effect have tumbled the price 15%. It is still a net gain, though the team will possibly be wanting to aim for a more consistent upwards trend. Rollercoaster rides are not fun for anyone involved.

This is the world of the internet though. An idea can blossom in a second and can crashing down even quicker. That said, despite the bad news at least one person is bounding around with a skip in his step though.

According to a SEC filing, over the course of 2017 Co-founder and CEO Evan Spiegel was paid a salary of $98,078 while also being awarded stock to the value of $636,612,889. Even with the share price decline, Spiegel is hardly going to be digging at the back of the sofa for loose change.

Snap’s spreadsheets start to crackle as sales pop

Snap has always been pretty good at coming up with new ideas to engage consumers but making money was always its Achilles heel.

For the three months ending December 31 sales hit $285.7 million, an increase of 72% year-on-year, while for the year it was up to $824.9 million, a 104% increase. While these numbers might sound impressive, net loss for the year stood at $3.4 billion mainly down to stock rewards to its engineers. This compares to a loss of $500 million in 2016. We’re not quite sure what to say about that numbers.

“Our business really came together towards the end of last year and I am very proud of our team for working hard to deliver these results,” said Snap CEO Evan Spiegel. “We executed well on our 2017 plan to improve quality, performance, and automation, which removed friction from our advertising business and improved our application for the Snapchat community.”

Looking at the audience numbers, Daily Active Users increased 8.9 million or 5% sequentially to 187 million, while ARPU was $1.53 in Q4 2017, up 46% year-over-year and 31% sequentially. These improvements have been partly put down to improvements of the experience of the Android application, which Spiegel said increased retention rates by 20%. These improvements have led to increased engagement for the users, and also better value for advertisers.

Of course, the numbers are still pretty small when compared to the other social media giants but they are heading in the right direction. To take the next steps, Snap will be looking to continually improve application performance, while also partner up with telcos to reduce the bandwidth cost of the app. On the sexier side of development, Spiegel also boasts about moves into the world of augmented reality and content.

On the content side of things, the Wall Street Journal is reporting a partnership between Snap and NBC focusing on the Olympic Games. As part of the agreement, NBC will broadcast two- to six-minute live segments of key moments from the games. This is another interesting idea from Snap.

This is part of the problem Snap has been facing; it has never really been rewarded for the good ideas the team comes up with this. This highlights partnership is a good idea which will open up the brand to new audiences, but it is something which will be replicated by the bigger boys in the social media playground. For instance, the stories feature which so many people use on Facebook and Instagram, was originally the brainchild of Snap. You have to give credit to Snap for coming up with good ideas, but the cash reward is being realised elsewhere.

Should Snap be able to get enough partners involved with these highlights partnerships there could be rewards for the team. The next logical step could be into cinema trailers and promos, but it will have to prove it can hold onto the audience and the idea first and foremost.