More broadly, creating new products and features that have mass-market appeal and cannot be readily mimicked is a huge challenge, analysts say.
“It’s worrisome,” said Paul Meeks, chief investment officer at Sloy, Dahl & Holst, which manages more than $1 billion in assets. “Snapchat is going to have to continue to be really innovative and distinctive. It’s going to be very tough to trump Facebook.”
Snap declined to comment for this story.
Snap first signaled its new focus with the September reveal of Spectacles, funky sunglasses with an embedded video camera for posting to the Snapchat app. The company spent $184 million on research and development last year, nearly half its revenue.
Augmented reality, which refers to computer-generated images overlaid on real surroundings and viewed through a smartphone or special glasses, is a big part of the plan. Snap’s “lenses” image-overlay feature has been a hit, and gives Snap an advertising format that’s unique, at least for now.
“If you’re going to make the bet longer-term on Snap, you are betting they are going to come up with innovative products that Facebook can’t copy,” said Nabil Elsheshai, senior equity analyst at Thrivent Financial, who is considering whether to recommend that his firm buy Snap’s IPO.
