- Snapchat steps out of the IM market and introduces a basic AR-device.
- Snapchat took advantage of fundamental problems in the AR market and might reproduce it in adjacent markets as well.
- Spectacles' success could reaffirm a 2017 IPO and strengthen the bullish case in such an event.
As the virtual reality industry slowly begins to take off, the absence of any significant progress in its twin technology, augmented reality, is incomprehensible. The first two principal players, Facebook (NASDAQ:FB) and HTC, had launched their VR devices earlier this year and experienced significant demand that reaffirmed most early estimations about the potential of this market. After Facebook and HTC Samsung Electronics (OTC:SSNLF), which introduced Gear VR last year, joined the race. Sony Corp (NYSE:SNE), Alphabet Inc-C (NASDAQ:GOOG), and other smaller players are expected to join the race next, towards Thanksgiving.
Spectacles: An Incremental Progress
A couple of years back, it seemed that the AR market would bring a new revolution to the IoT trend and wearable devices with Google Glass (or its successor), Microsoft (NASDAQ:MSFT) HoloLens, and Intel (NASDAQ:INTC) Smart glasses, among many others. Today, this market seems almost non-existent. Google just brought Google Glass back for a re-design, Microsoft only launched a $3k developer version like Google did a few years back, and Intel partnered with Luxottica's (NYSE:LUX) Oakley to launch Radar Pace, a voice-activated fitness sunglasses. All of the devices mentioned, and many more, are not affordable and have no price segmentation. Moreover, the devices are significantly different from one another indicating that the entire AR market has seemingly not yet understood how to monetize its incredible potential.
Amid the slow progress in the AR market, it was very surprising to see Snapchat (SNAP), among all tech companies, launching affordable--and some might say even fashionable--recording sunglasses. Even though we are a long way to a full AR device, with Snapchat’s invention, it looks like this is the kick in the butt that the industry needed so badly. While Microsoft and Google struggled for years to introduce a full fledged AR device with rich capabilities and a long feature list, Snapchat took another angle and offered a single-feature device that is now viral. Snapchat’s device is a good example of how big tech companies try to deliver very sophisticated products that appear to be very hard to execute while small and innovative companies think outside the box.
Snapchat’s device raises a fundamental question for AR vendors–Why do they focus so strongly on launching a full-blown, complex device at once instead of approaching development in smaller steps and releasing basic devices with narrower capabilities. For example, we can take a look at the VR market where Facebook Oculus partnered with Samsung to deliver an interim VR device that is based on Oculus technology and powered by the Samsung Note 4. Google also offers its temporary solution, the Cardboard, which is an affordable cardboard that folds into goggles that can be turned into a VR headset with an Android-based phone. Both devices are expected to be replaced by a full-blown VR device.
For some reason, the AR industry tries to leap beyond that stage, which seems to delay the introduction. Snapchat’s Spectacles offers a very basic interim device with a very narrow offering, but it clearly shows Google and Microsoft that even as they slowly struggle with the execution of their devices, other companies might pass them, using out of the box thinking and strategy. This is a clear sign for the sleepy AR market to increase the pace of development and that the market might be ready for interim solutions.
IPO In The Offing?
The Spectacles are being introduced during an eventful period for Snapchat when the company is rumored to go public in 2017; Facebook added many new features aimed at the Snapchat user base, like Instagram Stories; Additionally, there are the new Snapchat-like instant videos feature in FB Messenger and the Snapchat-like stickers and photo-editing features in WhatsApp. Suddenly, Snapchat’s uniqueness, which attracted users and advertisers, is being challenged. While the company will need to fight back on that front, it must also realize that it has to accelerate the development of new revenue streams.
Also Read: Snapchat IPO In 2017 Is A Remote Possibility
It is very early to predict how the new device will be accepted by users. However, its slick look and affordable price tag (around $130) makes it an excellent addition to Snapchat’s arsenal. The Spectacles device allows users to record a short video directly from their sunglasses and produce a wide-angle shot that includes the users’ viewpoint and a natural field of view that is closer to the eyes. This is a small feature, but it has a good chance to be a successful one with Snapchat’s users as it enables them to create richer videos that are closer to reality.
Even if this attempt does not generate a substantial amount of revenue, it is an important effort for the company in developing its ecosystem and expanding beyond the traditional IM market. This is part of the growth process that Snapchat is going through as it knows exactly how to address its potential users. Snapchat’s Spectacles device not only shakes up the AR market, but it also sends a clear message to players in adjacent segments: a basic but innovative device can be the right next step. This is a significant development for Snapchat. If it succeeds, I can definitely see how it will reaffirm the company’s plans to go public in 2017 and strengthen a bullish case for a Snapchat IPO.