Snap Expands Augmented Reality Efforts, Brings New Feature

Snap’s (NYSE:SNAP) focus to boost user base and win over investors’ confidence by continuous addition of new features is really noteworthy.

Recently, the company added 3-D Friendmoji Deluxe World Lens feature on its messaging application Snapchat. In a further push into the world of augmented reality (AR), the tool will enable Snapchatters to superimpose a 3D version of not just themselves but also of their friends on their posts.

Reportedly, users on Apple’s (NASDAQ:AAPL) iOS and Alphabet’s (NASDAQ:GOOGL) Android devices having the Bitmoji app can avail this feature, which is built on the company’s Bitmoji Deluxe feature launched last month.

Snapchat had acquired Bitstrips, the developer of Bitmoji, in March 2016. Notably, Bitmoji and Snapchat became the top two most popular apps in 2017 on the App Store as revealed by Apple last December.

Will the Efforts Drive Growth?

Snapchat’s top-line growth has been a major concern for investors primarily due to its predominantly young user base and stiff competition from well-established peers like Facebook (NASDAQ:FB) .

By adding a plethora of exciting features on a continuous basis the company has somehow addressed these concerns. Last quarter, Snap witnessed an increase in ad spending primarily due to a rise in seasonal brand advertising business.

Moreover, in order to make the platform more attractive, Snap recently redesigned the application, which unfortunately spurred unrest among users. An online petition with more than a million signatures was filed in order to get users back to the old application.

However, CEO Evan Spiegel has immense faith in the long-term benefits of the redesign and believes it will “provide a strong foundation for the evolution of our business.”

Redesign to Hurt User Base

Nevertheless, we believe user dissatisfaction with the new design can dent advertising revenues, at least in the near term. Notably, management forecasts brand advertising revenues to moderate in the current quarter.

Snapchat’s daily active users (DAU) of 187 million witnessed 18% year-over-year improvement in the last quarter. However, it is miniscule compared to its peers. Besides, Snapchat is mainly driven by the younger demographic and lack of popularity among the older generation has been a concern.

Per a recent report by eMarketer, in 2018, Facebook is likely to lose 2.1 million below-25 domestic users while Snapchat will gain 1.9 million users in that age group.

However, overall U.S. user base of Facebook owned Instagram is expected to grow 13% this year, while that of Snapchat is anticipated to grow 9%.

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