Why Does Snap Want To Launch A Gaming Platform?
Snap (NYSE:SNAP) is reportedly prepping to launch a new gaming platform during its Snap Partner Summit that will be held on April 4th, allowing third-party developers to create games for the Snapchat app. Below, using underlying Trefis analysis, we take a look at the potential of a gaming platform for Snap.
Why is Snap interested in the gaming market?
- Gaming could help Snap further improve user engagement, helping to drive user loyalty and ARPU
- There could be multiple avenues for monetization, including revenue from the sale of games, from advertisers looking to place ads inside games, and also from in-game purchases.
- The model of marrying a chat app with a gaming platform is well-proven (Facebook Messenger, WeChat), making it a natural extension for Snap
What advantages does Snap bring to the gaming market?
- Snap has access to a prime demographic, with Snapchat reaching ~80% of U.S. social media users in the 12 to 24 age group per eMarketer in 2017. Its engagement levels have changed since then given intense competition from Instagram, but it still has a broad reach.
- Snap also has a track record of innovation in areas such as augmented reality gaming, which projects digital objects onto the real world using a smartphone’s camera.
- Despite aforementioned competition, Snap users are still highly engaged (30+ minutes on app daily) and already use tools such as Lenses and its mini AR-based games called “Snappables”
- Up 6% In The Last Trading Session, Where Is Snap Stock Headed?
- Beating S&P500 By 62% Since The Start Of 2023, How Will Snap Stock Trend After Q4 Results?
- Up 91% YTD, What’s Next For Snap Stock?
- Is Snap Stock Attractive At The Current Levels?
- What To Expect From Snap Stock?
- Snap Stock Is Fairly Valued
What has Snap been doing to build its platform?
- Snap acquired Prettygreat, an Australian gaming developer, last year, giving it an in-house game development team
- The company reportedly acquired web-based 3D game engine PlayCanvas, allowing it to provide more robust developer tools
- Tencent — the owner of the WeChat messaging service and one of the largest gaming publishers – holds a 17% stake in Snap and there is a possibility that it could cooperate with Snap in publishing mobile games.
Could the Tencent relationship help Snap?
- Tencent could bring some of its popular games including Clash of Clans and Arena of Valor to Snap, adding some exclusive features.
- Tencent also has significant experience with monetizing gaming assets (mobile games accounted for ~$11 billion of its FY’18 revenue). It’s possible that the company could help Snap in this regard (though the degree to which Tencent will participate remains unclear).
Our interactive dashboard analysis on What’s The Outlook Like For Snap In 2019 details our key forecasts and estimates for the company. You can modify key drivers to arrive at your own EPS and revenue estimates, and see more Information Technology company data.