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Snapchat’s quest for AR innovation amid economic challenges

Discover Snapchat's strategic moves in AR innovation amid economic challenges and partnerships' potential to drive its growth in the AR wearables market.

In the dynamic world of social media, Snapchat continues to resonate with younger audiences, boasting a robust growth trajectory. However, the platform needs to improve in boosting revenue and curtailing escalating costs under the current economic climate. This year, Snapchat has made tough decisions, including job cuts and putting ambitious projects on hold due to financial constraints. Despite attracting over 30 million new active users, surpassing 400 million daily active users (DAU) for the first time, its growth in North America and Europe – key regions for income generation – remains sluggish.

Snapchat’s potential in emerging markets is undeniable, yet immediate financial gains from these regions are limited. Meanwhile, its Snapchat+ subscription service, now with 7 million members, contributes modestly to the company’s earnings. In the third quarter of 2023, Snapchat generated US$1.189 billion, with Snapchat+ accounting for approximately US$81 million.

The Augmented Reality (AR) dilemma

Snapchat’s strength lies in its pioneering augmented reality (AR) development, which has been at the forefront of AR trends. The company’s advanced AR tools have set the stage for innovative experiences. However, financial constraints have narrowed its options, including developing its AR glasses, Spectacles. In limited testing and development for over two years, these glasses have yet to see a consumer release due to increased production costs and limited spending flexibility.

Should Snapchat aggressively pursue its AR ambitions, competing with tech giants like Meta and Apple, or has the competition already surpassed Spectacles in the AR race? Meta’s Ray-Ban Stories are gaining traction, offering a stylish, functional AR experience. Despite its high-priced US$3,499 Vision Pro headset, Apple remains a formidable competitor.

Snapchat faces a stylistic and functional challenge against Meta’s Ray-Ban Stories. The path forward might involve collaborating with third parties and leveraging Snapchat’s AR expertise in other products and systems. Snapchat has previously partnered with Apple on AR projects and is exploring a partnership with OpenAI, potentially integrating ChatGPT-like features into Spectacles.

Strategic partnerships: A way forward?

Snapchat’s future in AR wearables hinges on strategic decisions. As an independent entity, the platform is sustainable and poised for growth in certain areas. However, larger projects require more investment. Collaborating with industry players like OpenAI and Microsoft could provide the necessary impetus to advance in AR.

Snapchat must act swiftly to maintain its relevance in AR. If Meta releases its AR glasses ahead of Snapchat, it could significantly diminish the appeal and value of Spectacles, especially if they’re pricier and less appealing. A partnership could be Snapchat’s ticket to staying competitive and influential in the evolving AR landscape.

While there’s no imminent news of such collaborations, keeping an eye on future announcements from Evan Spiegel and his team could provide insights into Snapchat’s strategic direction in AR development.

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