Snapchat’s Big Bet on AI, & Its Bigger Bet on AR Glasses
What brand marketers need to know about Snap Summit 2024
Snap Inc, the company behind Snapchat, has not been doing so great lately. The company’s revenue declined last year as it struggled to expand beyond the slowing digital ads market, and it ended up cutting 10 percent of its workforce in February to save costs. On top of that, it is also mired in lawsuits, and had to recall and refund all the selfie drones it ever sold because their batteries turned out to be a fire hazard. Overall, Snap’s stock has plummeted by 88% in the last two and half years.
It is in such a back-against-the-wall context that Snap delivered a rousing keynote presentation during its Snap Partner Summit 2024 on Tuesday. In under 75 minutes, the company unveiled a simplified app design that boosts creator videos and maximizes ad revenues, integrated a slew of AI-powered creative tools, and offered a promising glimpse into the future of AR glasses with its latest iteration of Snap Spectacles. The in-person audience sounded quite enthusiastic and receptive to the announcements, but are they enough for Snap to turn its ship around?
Snapchat, Simplified (But with More Ads!)
Snapchat, which pioneered the concept of disappearing messages and stories among social apps, still boasts about 850 million monthly active users worldwide. However, a quick look at the company’s financial reports would reveal that it has struggled to consistently generate profits from that user base — not for the lack of engagement, but because Snap is always spending more than it earned to chase its AR dream. During a year of economic uncertainty, Snapchat’s ad revenues dropped by 9.7% in the US YoY in 2023, per eMarketer.
To make up for its lackluster ad revenues, Snapchat also tried to make money off subscriptions. In 2022, it introduced Snapchat+, a paid tier that gives users early or exclusive access to premium features, in a bid to increase its average revenue per user (ARPU). So far, Snapchat+ has garnered 11 million subscribers, or about 13% of its user base. It provides a nice additional revenue stream that most social media apps don’t have, but it’s still not enough to make Snapchat profitable.
Faced with such a pressing issue of profitability, it is no surprise that Snap has decided to double down on its ad products. However, Snap is also smart enough to realize that cramming more ads into its already-crowded app would be a surefire way to incite user backlash. So, instead, Snap CEO Evan Spiegel kicked off the keynote by announcing a “simplified” version of its app. “Simple Snapchat” slims down from five tabs to three tabs — the app still opens to its signature AR-ready camera UI, but now users can swipe left for messages and stories with friends (in a UI that is reminiscent of Instagram), or swipe right for a TikTok-esque, full-screen feed that showcases Spotlight videos from creators and Snap’s publishing partners.
Obviously, the primary goal of this redesign is to make Snapchat more accessible and offer a familiar and attractive way to watch short-form videos, from which Snap derives the majority of its ad revenue. This move, coupled with Snap’s recent decision to start testing “Sponsored Snaps” next to messages from friends, show it is aiming to leverage both its strength as a messaging app and its creator content to drive engagement and ad revenue.
Putting AI Into Creators’ Hands (And Hope for the Best!)
Because creator content is what currently drives Snap’s revenues, the company is very mindful of supporting the creators on its platforms. The Spotlight-forward redesign, for instance, should drive more views for Snap’s creators, who collectively share more than a billion pieces of content per month in the app. Meanwhile, the new simplified profile design enables creators to easily toggle between personal and public accounts, while the ability to pin favorite Snaps to public profiles enhances visibility.
Besides that, Snapchat also stands out for its commitment to empowering creators through integrated AI-driven tools. One of the most significant additions is Snapchat’s new AI video generation tool. Currently in beta and accessible to a select group of creators, this tool allows users to produce videos from text prompts, with plans to incorporate image prompts in the near future. Reportedly powered by Snapchat’s proprietary foundational video models, this AI video generator could democratize video production, enabling more creators to bring their ideas into life with ease.
Moreover, Snapchat has introduced a Easy Lens feature within Lens Studio, allowing creators to develop AR Snap Lenses simply by describing them in plain English. This AI tool not only streamlines the lens creation process but also opens the door for a broader range of creators to engage with AR technology, enhancing user interaction and creativity on the platform. Additional AI features, such as icon generation for lenses and animation blending for Bitmoji, aim to provide creators with more user-friendly tools to enhance their storytelling.
Through these new features, Snapchat demonstrates a strong commitment to empowering creators by integrating cutting-edge AI tools and features. However, this approach raises concerns about the potential oversaturation of low-quality content on the platform. The ease with which users can generate videos, AR lenses, and other creative assets could lead to a flood of “AI slop,” ultimately diluting the overall quality of what users encounter, and undermine user satisfaction — something that all social platforms are surely hoping to avoid.
In today’s media environment where attention spans run short, consumers tend to browse through a lot of content on a surface level. But deep down, everyone graves creative content that truly resonates and holds genuine artistic value — a true marker of user satisfaction, rather than just killing time. After all, as Ted Chiang brilliantly argued in a recent piece for The New Yorker, AI, as it stands now, cannot create true works of art, because it lacks intent, and is designed to bypass the numerous decisions that people make that, in aggregate, defines the creative output. If Snapchat becomes synonymous with cluttered feeds filled with AI-generated mediocrity, it may risk alienating its core audience and losing the authentic connections that originally fueled its success.
The Big Gamble on AR Glasses (Perhaps Still Too Early?)
Snap’s enthusiasm around AI is also evident in its big “one more thing”-style reveal of its latest iteration of its AR glasses, Spectacles, at the end of its keynote. The new Spectacles include Snap’s OpenAI-powered chatbot, My AI, which is integrated into the glasses’ interface. This allows users to interact with an AI assistant directly through the AR glasses. Moreover, CEO Evan Spiegel also demonstrated using built-in AI to generate 3D animations based on voice prompts. This showcases the potential for AI to create real-time dynamic content in mixed reality environments.
The new Spectacles run on Snap OS, described as a “groundbreaking operating system designed to enhance how people naturally interact with the world”. This aligns with Apple’s vision of spatial computing with the Vision Pro. Another thing that aligns with Apple is Snap OS’ hand-tracking and eye-tracking UI, which all the major immersive headsets are coalescing around.
As with its previous iterations, the latest Spectacles are still not consumer-ready. Instead, they are being made available exclusively to developers through a subscription model. This developer-centric approach reflects Snap’s long-term vision for AR, as the company seeks to build out applications and use cases. However, despite its early mover advantage and unwavering focus on AR development, Snap faces several challenges that may prevent its ambitious bet on AR glasses from paying off in the near future.
While the hardware improvements are impressive, the field of view remains narrow, and the battery life is limited to about 45 minutes per charge. These constraints, combined with the lack of seamless integration with the wider Snapchat platform, make it difficult for the glasses to deliver a truly transformative AR experience. As a result, despite its advanced hardware, the Spectacles may feel more like a futuristic prototype than a consumer-ready device.
Snap’s early release of developer-focused AR glasses positions it ahead of major players like Meta and Apple in certain respects. Meta is expected to unveil its “Orion” AR glasses at the Connect 2024 conference next week. By moving early, Snap is staking its claim in the AR space, particularly in the consumer and social realms, where it believes it can differentiate itself. Whether developers and consumers agree with that, only time will tell.
In conclusion, while Snapchat is making significant strides with its AI-driven tools to empower creators, it continues to place a bigger bet on the accelerated development of spatial computing and its AR glasses. Despite impressive advancements in hardware and early inroads with the AR developer community, Spectacles are far from ready for mass adoption. The technological limitations, combined with the lack of immediate consumer appeal, suggest that this gamble may not pay off anytime soon. This puts additional pressure on the company to capitalize on creator content to drive revenue in the short term. If Snapchat cannot successfully monetize its growing creator ecosystem and leverage AI innovations to boost user engagement, it risks falling further behind in an increasingly competitive market.