Market Insight

Snap's new Spectacles face major challenges despite improvements

May 01, 2018

Jack Kent Jack Kent Director, Media and Advertising

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US-based Snap, parent of messaging app Snapchat, has launched its second wearable product Spectacles V2.

Available for USD 150 via the Snapchat app and website, the new Spectacles sunglasses will be available in more than 20 markets in the first couple of weeks of launch and feature: photo as well as video capture, HD recording by default, improved Bluetooth pairing, prescription lenses support, and new colour options.

Our Analysis:

Snap hopes to learn lessons from V1

After generating positive early PR buzz for the first iteration of Spectacles, Snap only sold a disappointing 220,000 pairs, had to write off $40m of stock, and faced reports of little repeat usage among early adopters. With Spectacles V2, Snap will hope to learn from those lessons. The improvements in V2 aim to address many of the original shortcomings:

  • Distribution: The original pop-up Spectacles booths helped Snap generate positive PR but proved to be an ineffective way to manage supply and demand. Opting for app and online distribution should help Snap manage its resources better and avoid the type of write-down that it faced with Q1.
  • Technology: improved Bluetooth pairing solves one of the annoyances faced by early adopters; prescription lens support broadens the addressable market for Spectacles.
  • Features: adding photo capture as well as videos and HD as standard is a direct response to user feedback; new colour options should make the product more attractive.

Snap ecosystem strategy is still a major limit

The V2 launch cements Snap’s positioning of itself as  “camera company” rather simply a messaging app – as outlined in IHS Markit's 2017 report on Snap’s post IPO strategy  - and so diversifying into consumer technology is important.

Despite improvements in features, software and hardware, Snap Spectacles still have a critical drawback in being limited for output and sharing to only the Snapchat app. A price of $150 for relatively limited features and a use case that is only compatible with one app means that Spectacles are likely to only have a limited impact. If Snap was looking to secure a wide role in the consumer devices market it would enable tools to share content to third-party apps and sites, by focusing only on its own app it is trying drive additional revenues from its most engaged users rather than capture a wider audience. Such a device/ app ecosystem tie-in is not uncommon, Apple’s Apple Watch is tied to its iOS/iPhone ecosystem, but Snap has a much smaller relative audience size and Spectacles are much more limited in features, which presents challenges to for Spectacles adoption.

Geography
UK USA
Organization
Snapchat
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