Snap Inc. (SNAP), the parent company of popular photo and video sharing platform Snapchat, is reportedly planning to expand its reach into the high-flying gaming space as it struggles to hold its ground against Facebook Inc.'s (FB) Instagram, according to a new report from The Information.
The social media company's new gaming platform, slated for launch later this year, would make the firm more similar to WeChat, owned by Chinese internet behemoth Tencent Holdings. If Snap succeeds in implementing the offering to mirror WeChat, which has seen sales skyrocket thanks to in-game purchases, it could hedge against fears of weakening ad revenues. Snap Inc. Chief Executive Officer Evan Spiegel has publicly expressed his admiration for Tencent, which now generates about 40% of its total sales from in-game purchases on WeChat.
The initiative would also help boost user engagement for the struggling social platform as Instagram rolls out features strikingly similar to its own, like Instagram Stories and in-app photo and video filters. Giving users more things to do and play around with on the app typically equates to more time spent on the platform.
New Realities at Snap
In the recent period, Snap has been ramping up its investment in its internal Lens Studio to develop software for specialized augmented reality (AR) filters. In April, the tech firm launched short selfie AR games that integrated into Snapchat's Lens selection user interface. The new gaming titles could focus on AR, giving Snap an unique advantage over competitors. Per that information, Snap will allow third-party developers to make games for Snapchat, and one publisher is already signed up. Facebook's Messenger app has already experimented with short, shareable mini-games.
Snap stock tanked earlier in June on a report from one team of bears citing survey results indicating that daily user engagement on the platform has fallen 7% over last year, and that in a survey of ad buyers, Snap ranked lowest among all social media platforms on multiple levels.
Trading up 1.3% on Thursday morning at $12.99, SNAP reflects an 11.1% decline year-to-date (YTD) and a 26.8% fall over 12 months, sharply underperforming the SP 500's 1.3% return and 11% growth over the same respective periods. (See also: Snap Ranks Lowest on Various Key Attributes: Cowen.)