What’s Next for Snapchat? A Look at Snap Inc Ahead of Their Q2 Results

Snap Inc., the parent company of Snapchat, will release its Q2 2017 earnings results next week, and analysts will be looking for a significant improvement in their Q1 numbers, which showed that user growth was slowing, profit is still a long way off, and, in general, the company has a lot to prove before it establishes itself in the market.

Since then, Snap Inc. has been working to add in new revenue–generating options, including their self-serve ad platform which is now available to all business, in-app Geofilter creation and purchase, and Snap Publisher, a tool which makes it easier to create Snapchat ads.  

All of these are likely too new to have any significant impact on the immediate bottom line – so what else can Snap do, and what do they have coming next?

Here are a few other areas Snap’s focusing on which could deliver benefit.

Acquiring New Options

In the past few months, Snap has acquired several companies to help expand its offering, with a particular focus on geolocation capabilities.

In early June, Snap acquired Placed which tracks the effectiveness of online ads and how they drive in-store sales. According to TechCrunch, Placed has already measured more than $500 million in ad spend for a range of companies, helping to provide them with a clearer idea of how, exactly, their digital ads impact sales.

That’s a significant step for Snap – one of the biggest criticisms of the app as an ad tool is the lack of metrics available, and transparency on Snap data. Placed may help Snap provide more assurance on this front, which could help them encourage more ad spend.

Additionally, Snap has this week announced the launch a new program to allow third-party measurement firms to track Snapchat ad impact on a brand’s sales, further boosting such efforts.

Such efforts are especially important when you consider that Snap’s key pitch is that while it can’t compete with Facebook on scale, its user base is more engaged, and thus, more likely to respond to ads. Placed, and third party verification, may help them prove this.

Snap also acquired Drop in late June, an app which enables users to leave digital messages assigned to locations, which otherss can then ‘pick up’ when they go there.

The feature could be added to Snapchat’s Maps feature, also added in June, to provide a new interactive element to the Snap process – while it may also provide another interesting way for businesses to engage their Snapchat audience. For example, you could digitally attach a special offer at your store location to bring in more customers via Snap, or you could set up an AR treasure hunt, Pokemon GO-like, which leads to special rewards.

Snapchat hasn’t revealed how the option might work as yet, but there are several ways they could utilize the tool.

Location-based systems are obviously going to be a key focus for Snap moving forward, and it’ll be interesting to see how they seek to differentiate their offering from others on this front.

In addition to this, Snap also recently purchased Strong.Codes, a Swiss-based software protection company which hides software code, making it more difficult for others to copy a program or app. Which obviously has significant relevance for Snap, given the rate at which Facebook is copying their ideas.

How effective Strong.Codes might be at limiting this is hard to say, but Snap obviously felt they had something to offer on this front.

Exclusive Content

Snap is also looking to add more exclusive in-app content to better engage their user base.

The company’s been working with various publishers on creating short-form, TV-like content for some time, and just recently, they announced a new deal with NBC to air an exclusive program on Snapchat called ‘Stay Tuned’ which will air twice a day and cover the latest news in 2-4 minute segments.

All the major platforms are making a push into TV-like content, and again, this aligns with Snap’s vision to facilitate more engagement in their app – to focus on better capitalizing on the audience they have, as opposed to trying to compete on scale.

It’s difficult to say how effective Snapchat TV might be, but the general impetus is that TV viewing behaviors have changed, and publishers need to adapt in line or risk losing that audience. Have they changed to the point where users will spend more time watching content in Snapchat instead of on TV? Maybe – YouTube’s data shows that the watch time of TV channels on their platform has increased 50% in the last year, indicative of a shift in consumption trends, with younger users leading the way.

If Snapchat can tap into that shift, they could be onto a winner, though it will take time to develop.

Aside from video, Snap’s also looking to partner with college newspapers to produce local campus editions of their publications for Snapchat Discover, an effort to further engrain Snapchat usage amongst the student base. This, again, makes sense, given Snapchat’s popularity amongst college users – and while it can only help to encourage more stickiness with this audience segment, putting too much emphasis on college students is not always the best strategy. Just ask Yik Yak (note: Snap’s strategy is significantly more advanced than Yik Yak’s, this is merely for comparison’s sake).

New Tools

And then there’s Snapchat’s new tools, the area they’ve long lead the way on.

In the past few months, Snapchat has added:

You can now record minute long video segments to add to your Snaps

Instagram has duplicated some of these, but for the most part, Snap has continued to add new, exclusive tools, which, as noted, has always been a key strength of the app.

In addition, Snapchat has sought to encourage more group interaction – they introduced Collaborative Stories back in May, which enable multiple users to contribute to a single Story, while more recently they’ve expanded the size of Snapchat group chats to 32 participants.

The focus on groups again points to their community efforts, to better engaging their existing audience – really, Snap has little to no capability to compete on scale, particularly with Instagram and WhatsApp rolling their own, Snapchat-like tools out in global markets.

Can Snapchat generate significant interest, and revenue, with less than 200 million total users? It seems like this is the path they’re taking, which will be a hard sell to advertisers, to whom scale has always been the key barometer.

And then, there’s always Spectacles.

While Spectacles appear to have done reasonably well, the hype around the device has died down significantly from the launch and the clever marketing tactics to boost interest. It’s always seemed like Spectacles were destined for more, that Snap Inc. was looking to make them a more all-encompassing, maybe even AR-enabled, device, but there’s been nothing on Spectacles V 2.0 yet. There are rumors, reports that a new prototype is being tested, but nothing solid.

While it would seem unlikely that Snap Inc. would be able to beat out Facebook on the AR front, they do already have a hardware device in circulation, which is ahead of Zuck and Co., and they’ve essentially lead the way on AR with their Lenses and image enhancing tools.

If Snap Inc. really is a ‘camera company’, Spectacles could be their key focus – it would be a big jump, but Snap may still be in the best position to make AR-enabled glasses cool, and to sell them to the mass market.

And the potential of that development could be huge. Imagine Spectacles ads overlaid as you look around, venue information, data on other Snap users appearing above their heads. Facebook CEO Mark Zuckerberg says we’re still about 5-7 years away from fully functional, AR-enabled glasses, but I wouldn’t entirely bet on Snap not being able to move faster on this. At this stage, that seems like their only true avenue for significant differentiation.    

It’ll be interesting to see what the numbers show next week, and what Snap’s executive team can say to assure investors of their future vision and development. Right now, Snapchat is not a significant element in the marketing plans of most brands – but that could change. The stock is being hammered, and the likelihood of a sudden turnaround seems small, but there are still significant opportunities in Snap.

How realistic they are, and how fast they can be delivered, is another matter.