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Snap continues to lead the way in consumer AR. By “lead,” we mean that it has the most engagement at 6 billion lens views per day. We also mean revenue, with a leading market share for brand AR marketing spend according to our research arm ARtillery Intelligence.
But like many companies that mature, percentage growth gets harder to maintain as the revenue base gets larger. Companies also approach natural ceilings, such as the upper bounds of their addressable market. This is what the smartphone market is currently facing… just ask Apple.
Often, the answer is diversified growth through adjacent products, channels and verticals. Apple has done this through services, entertainment, advertising, and wearables. Back to Snap, its answer for finding adjacent growth and headroom is to expand beyond its own app.
Why is this important? Snap’s revenue is tied to brand marketing, which is all about scale and reach. So the more users it can reach, the more it can compete for brands’ finite ad budgets, and demand premiums. So how is Snap doing this? Let’s examine a few of its market moves.
Camera Kit
Starting with the most established channel for Snap’s AR growth, Camera Kit takes its Lens Studio AR creation platform and spins it out for consumer brands to use. This takes form in an SDK that lets brands bring Lens Studio into their workflows and design environments.
In fact, this is one of the least discussed components in Snap’s AR arsenal. But it’s potentially its best path to greater lens engagement and scale. After all, where else can you go to maintain growth after reaching six billion lens engagements per day? The answer is beyond your own walls.
To boil this down to a few examples, Camera Kit has been used by the likes of Disney to create brand-specific AR content. Specifically, the entertainment giant uses Camera Kit to create AR lenses that deepen engagement with its branded content in and around its theme parks.
If you’ve ever been to Disneyland, one pastime (for better or worse) is grabbing the attention of roving characters in costume to pose for a picture. AR lenses can streamline that use case through customized lenses with characters or other digital accouterments and living murals.
Another example is Burberry, which worked with Vertebrae (owned by Snap) to create a Snap-powered AR product visualization experience. All this happened on the Burberry website, where it’s most comfortable bringing shoppers in for a brand experience with a specific vibe.
And that’s often the case with brands that have a well-cultivated persona, such as fashion and lifestyle brands. This could represent a segment with which Camera Kit resonates. And Snap’s ownership of Vertebrae elevates its abilities around high-end luxe brand experiences.
ARES Development
Building on the concepts behind Camera Kit, Snap recently launched AR Enterprise Services or ARES (pronounced “Aries”). Unlike an SDK, a la Camera Kit, this is a fully-formed SaaS offering that forms a sort of enterprise version of Lens Studio, with ample brand-centric features.
One of these selling points for example is the ability for brands to distribute lenses through their own channels. So in addition to AR lenses on Snap, they can offer the same on their own apps and sites. This resonates with brands like Burberry above, given well-manicured digital properties.
ARES also specializes in fashion try-ons, which are tailored (excuse the pun) towards brands that sell clothes, hats, shoes, or anything that goes on your body. Snap has developed dimensional AR try-ons and perfected the art to the point where it can now spin it out in a SaaS product.
Meanwhile, on the back end, ARES hosts and manage digital assets such as bandwidth-intensive 3D models. Leaning on Snap’s already-existing Lens Cloud, the company can help ARES subscribers host those files and deliver them in a cloud-hosted and load-balanced way.
Lastly, ARES offers performance analytics and support. Given that AR virtual try-ons are still in early-adopter territory, there’s an intimidation factor for some brands. The support component – not to mention the SaaS packaging itself – is meant to lessen that stumbling block.
To bring ARES to market, Snap has tested it with a few partner brands like sunglasses company Goodr and clothing company Princess Polly. Snap says that these partners have already seen greater engagement, conversion rates, and fewer returns, to support the above claims.
New Hardware Channels
Lastly, Snap is seeking new user growth and engagement through hardware that extends beyond smartphones. And no, we’re not talking about AR glasses (though that exists in Snap’s roadmap too). The latest move involves stadium jumbotrons and smart mirrors in retail locations.
The latter brings AR try-ons to the places where they make the most sense: dressing rooms. They can digitally outfit customers in ways that are more streamlined than traditional dressing rooms. This should resonate with camera-native and increasingly buying-empowered Gen-Z.
For retailers, smart mirrors can bring also an “endless aisle” eCommerce advantage. In other words, they’re not bound by inventory constraints, letting customers try on a wider range of products. This also unlocks cash flow advantages through just-in-time inventory systems.
Mens Warehouse and Nike are first on board as partners. The latter represents a promising category for smart mirrors that can sit close to the ground, angled up for shoe try-ons. This could resonate most with sneakerheads, who can make and order custom creations on the spot.
Synthesizing all the above, it’s all about reaching new users with a larger tent. By doing so outside of Snapchat, Snap is grooming a larger AR user base. As such, we project this platform extension play to be Snap’s next growth engine, and possibly that of younger AR players like TikTok.
And it’s already working. Snap disclosed in its Q4 earnings that Camera Kit has been integrated by thousands of brands. As it continues to evolve with purpose-built capabilities like shopping, we’ll see AR capabilities increasingly show up on digital properties from Puma to Prada.
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