Should Snap Bother With A Gaming Platform?

Snap (NYSE:SNAP) is looking to launch a new gaming platform, as the company looks to better monetize Snapchat and improve user engagement. The company is apparently in the process of signing on game publishers, with the platform expected to launch later this year. Below we take a look at what a push into gaming could mean for Snap.

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Snap’s Gaming Ambitions

Although the concept of a gaming platform on a chat/social media app isn’t really new, it could prove to be lucrative for Snap if it is implemented in the right fashion. For instance, Chinese Internet behemoth Tencent sees roughly 40% of its revenues come from in-game purchases on its WeChat app. Tencent, which holds a 17% stake in Snap, noted that it would look for opportunities to cooperate with Snap for publishing mobile games. This could be meaningful for Snap, as Tencent is the world’s largest game publisher, with hits including Clash of Clans. Separately, gaming could also help the company boost user engagement for the Snapchat app, potentially converting occasional users into more regular users.

Snap will likely focus to a significant extent on augmented reality (AR) gaming – which projects digital objects onto the real world using  a smartphone’s camera – considering its history of AR tools such as face filters. The company has been improving its developer tools to this end, investing in its Lens Studio software that enables developers to create AR filters., while acquiring web-based 3D game engine PlayCanvas last year to provide more robust developer tools. Snap also launched mini AR-based games dubbed “Snappables” earlier this year, allowing users to control gameplay with their facial expressions.

Gaming Doesn’t Adress Snap’s Core Issue 

That said, it’s unlikely that a gaming platform will address Snap’s core issues. The company has been witnessing slowing user growth due to its recent app redesign, which did not go down well with many users and contributed to significant user defections. The company added just 4 million users during Q1 2018, taking its daily active user (DAU) base to 191 million. Snap faces significant competition from Facebook’s Instagram, which has adopted a fast-follower strategy of copying Snap’s most popular features and rolling them out to its vast user base. Instagram recently crossed 1 billion monthly active users, with its DAUs also likely to be about 3x Snap’s. If Snap is able to find success with its planned gaming platform, there’s no reason why Facebook wouldn’t be able to replicate a similar strategy across its apps.

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