Snapchat is now augmented reality-first

Some ideas about where Snapchat might be headed next

Facebook was looking for ways to own the post-mobile hardware platform and stop being a guest on somebody else’s porch. PCs are the old platform and Wintel won, current generation platforms are dominated by Google Android and Apple iOS, and it’s unclear if there is room for a third competitor at scale[1]. Facebook decided against making their own mobile phone and are instead investing in what is coming next.

Then Facebook acquired Oculus.

Virtual reality was always a stepping stone to augmented reality[2], as today you need to find time to actually use a VR headset.

Attention is a very fought-over currency

This is not the case with augmented reality, as you can double stack minutes doing other stuff and still consume AR content (via a pair of glasses for example[3]).

Snapchat is rumored to be tossing their hat in the ring and going for an AR play but I would argue that Snapchat is already an augmented reality company. Google pivoted into an artificial intelligence company around the time of the Deepmind acquisition [4]. Similarly Snapchat started with self-deleting messages but their lenses [5] have clearly taken over and they are the driving virality for new users. If you take that experience further then to me the mission of Snapchat becomes clear: it’s the lens through which you experience the world. A better, more beautiful, and augmented world.

Michelle Obama just joined Snapchat as well

Once you acknowledge that, there is no point in limiting it to a phone. Instead use lenses to mediate interaction with reality making a pair of glasses the perfect fit [6] and this is when it gets really interesting.

There are other companies in the AR space but they don’t have the passionate user base of Snapchat or they focus too much on games, which is cool and a big market in itself, but entertainment is tiny compared to say communications or commerce. A Snapchat reality lens powered by artificial intelligence and computer vision would be silly, incredible, and have widespread adoption all at the same time.

It would also be a great developer platform with clear ways to monetize. Expanding the lens to incorporate objects other than faces (e.g. cans of soda, so if you are looking at a Coke can it shows some cool animation) or different input lenses (e.g. an audio lens that generates custom clips when something is played or replaces ambient sound — possibly done with noise cancelling headphones). Like lenses today it doesn’t have to be dominated by advertisements blocking your reality.

But what about Oculus?

Oculus is essentially a game console manufacturer, and it’s not going down well with hardcore gamers. The product caters to gamers who can spend big 💸💸💸 on a new PC, but it can only be played for a bit before getting a headache. The design is not quite there yet and will realistically need several more iterations and the locking down of games is pushing consumers and game developers away from it and onto the HTC Vive [7].

Here’s what I believe is going to happen:

Facebook’s mission is simple and it’s about sharing experiences and content with others. To date Oculus doesn’t really fit that mission and possibly never will. Because of this I expect Oculus to be spun off or sold to a game company[8] or potentially to Microsoft as HoloLens is not a credible product (or even a product) and Oculus could be part of the Xbox unit.

Snapchat however is a fit and also a strategic threat to Facebook already (it’s half the size of Instagram). More importantly, its users are all about sharing. So it could fit the vacant space of AR left by Oculus. It’s well known that Facebook tried to buy them for $3bn but the offer was rejected, eerily similar to when Google tried to buy Facebook for $15bn [9]. Hopefully Facebook will remember that.

Snapchat’s self deleting messages are no longer the main reason why people join, it’s about AR and messaging (with AR). So expect to see them doubling down on lenses and possibly become a full augmented reality platform with their own hardware. But here’s the big difference with other AR vendors: they are all either stacked into enterprise edge cases (Google Glass at Work) or games. Snapchat is different. Snapchat is Minecraft. It has simple rules and is used mostly by young people (41% of US millennials are Snapchat DAUs) that have appropriated and explored and created their own language and culture on top of it. It has that new corinthian leather feeling that Facebook used to have. I believe this culture is Snapchat’s biggest asset.

Minecraft might not have an AR future but certainly leverages the same culture

This culture will adopt a new “toy” in the form of AR and go with it, while other competing platform will struggle trying to meet the expectations set by their bullish hype.

TLDR: Snapchat is an augmented reality-first company, Facebook will divest Oculus and instead try to acquire Snapchat (again). Unclear if Spiegel is willing to sell just yet.

Notes:

[1] Even though there could be an opportunity for a Cyanogen, or a new OEM to conquer critical market share by making it easy to install an OS on a phone. Blackberry is probably toast and ready to be absorbed by some large company like HP.

[2] But solving VR means solving a subset of technical problems and it can be easier than going AR native.

[3] Even though it could give life to pretty weird scenarios like this “Hyper-Reality” one https://vimeo.com/166807261. Although my point is that they want to make it fun for users to engage with brands and will have the brands pay for it. If the users are not engaged they won’t use the platform and therefore no critical mass for ads — therefore users > advertisers so not expecting weird stuff to happen.
Here are the original
WSJD Tech & Media Outlook 2016 slides.

[4] Yes Google was always an AI company but not really. It was a giant search engine with ads. That pivoting process was already under way but the Deepmind M&A was a clear demarcation point and right now we are seeing the results. See ‘Inside Sundar Pichai’s Plan To Put AI Everywhere‘.

[5] These are the video filters that make the silly faces.

[6] Glasses today and contact lenses in the future.

[7] This is the first time in more than a decade anyone is actually excited about HTC products. Incredible.
UPDATE: on June 24th Oculus pushed an update that removes the DRM lock. But the PR damage is done.

[8] I really don’t know who could afford to buy Oculus beyond actual console manufacturers. Game studios have no idea how to manage hardware. The other alternative is to keep Oculus and starve the unit of resources until it’s small enough that it can be folded into “Facebook VR Games”.

[9] IIRC I can’t find the article, but I think it was Megan Smith that was tasked with that directly from Larry Page.

Thanks to my colleagues Stéphane Bura and Mikkel Birkegaard Andersen for their help in writing this. You can find me as Rodolfish on Snapchat.

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