Why Snapchat’s IPO is a bet on augmented reality

Unless you were hiding under a rock, you’ll remember (and probably played) the addictive mobile craze of last summer — Pokemon Go. With over 500 million downloads and innumerable Pikachu memes, it was the first time many experienced the blending of real world and virtual and became the game that launched augmented reality into the mainstream.

But just as quickly as it started, the hype was over. And so it seemed, was AR. Or was it?

Without most of us realising, Snapchat had quietly achieved mass adoption of AR. By the end of 2016, one in five [1] of the world’s internet users were augmenting their image by barfing rainbows and putting cutesy deer ears on their heads.

Like Pokemon, Snapchat is a clever gateway to a much bigger concept…a mixed reality with clever contextual information overlaid onto ourselves (and soon the world around us.)

This is timely because Snapchat’s 26 year old founder/CEO Evan Spiegel (named by Forbes as the world’s youngest self-made billionaire) will debut the companies’ shares on Wall Street on March 2, in one of the most highly anticipated I.P.O.’s since Twitter/Facebook.

It’s well recognised that Facebook and Google are the platforms to beat in the online advertising world and with the IPO comes the inevitable question — whether to back Snapchat and bet against these advertising behemoths. Facebook in particular is pulling out the stops to replicate the success of Snapchat.

But Snapchat has a snappy new name (Snap Inc.) and a snappy new strategy — they’re a camera company, not a social network. ‘In the way that the flashing cursor became the starting point for most products on desktop computers, we believe that the camera screen will be the starting point for most products on smartphones.’ (Roadshow prospectus)

Snapchat’s orientation to ‘camera’ is important, because although Facebook, Instagram and Messenger have copied some of Snapchat’s most compelling features (such as Stories) none of these platforms start with the camera first.

Make no mistake, Snapchat is not imagining themselves a Go Pro. Spiegel gives us a taster of his vision in their roadshow video: “There’s a lot of excitement around this idea that the camera can be a launch-point for interactive experiences,” and there’s a clearer sign of intent when you look at their patent applications — a shift towards wearables and facial and object recognition tech — key to further developing augmented reality (CB Insights)

Snap.Inc is not a bet on social media, or even cameras, it’s a bet on an augmented reality world.

What could this world look like? Snapchat (and Spiegel) have shown a knack for picking future technologies that augment their app, giving users further fun and utility. From Looksery a face modification app, to Seene a 3D object scanning app, to Cimagine that helps John Lewis’s customers to visualise products in their own home

In November “World Lenses” arrived — using AR to add images to the view you see through your camera, rather than the view you see when you take a selfie. Your room can snow, sparkle or even fill with hearts. The next step (according to a patent) is advanced object recognition that serves filters with ads, promotions, and other information based on physical objects in a photograph or video. The patent outlines how advertisers could bid to serve ads for objects.

As a camera company that doesn’t own its own camera, it’s both smart and risky relying on the third-party camera ‘hardware’ from Apple, Samsung, Google and others. That’s why mobile is just the first step.

Released in September 2016 (and based on a product by the newly acquired Vergence Labs), Snapchat’s classy ‘Spectacles’ were their first camera/hardware product and are a pair of blue-tooth enabled sunglasses that lets you record and share short-form video. Spectacles have a built-in use-case — we’ve all fumbled around to open either a camera or an app on our mobile, only to realise the moment has passed — and is the thus the perfect beta for a wearable that has massive potential.

If Snapchat can nail AR ‘Spectacles’ in the way that Google never did with Glass, they could be the new cool brand that ensures mainstream take-up of AR wearables. To do this, Spiegel will need a Jobsian focus on design (which is why he’s playing up his Stanford product design roots), brand hype (which is why Spectacles were so scarcely available) and business acumen, to ensure ever increasing utility for the product. Snap Inc. will need to go all in and develop their own AR app ecosystem linked to Spectacles.

The billion $ question is — who will be first in the race to crack this new frontier? Tim Cook expressed excitement about AR in a recent Independent interview, which has led to speculation that the next-gen iPhone will have built-in AR. The Minority Report has arrived with the Microsoft HoloLens, but the price tag is prohibitive and the look of the headset leaves a lot to be desired. Magic Leap’s vision is tantalising, but seems little more than science fiction.

Keep your camera trained on Snap Inc, when the bell rings on Thursday.

[1] Global Web Index Snapchatters Audience Report Q1 2017

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