Will Snapchat’s Bet on New Shows and Video Games Pay Off?

Snap chief Evan Spiegel was the master of ceremonies on Thursday in West Hollywood, where his company revealed several new in-app experiences — including a fresh slate of original shows and multi-player video games —  to a room full of developers, creators, entertainment executives and Spencer Pratt. But he just as easily resembled a cautiously optimistic gambler in Las Vegas stepping up to the craps table, ready to spread his bets. Now the question for Snap is this: After a rocky 25 months as a publicly-traded company, will his bets pay off? On its new shows, Snap has taken a distinct approach: short, three- to five-minute episodes, shot vertically, without much star power but geared toward Snapchat’s loyal 13- to 24-year-old user base. (Spiegel mentioned on Thursday that the app reaches 90% of  13- to 24-year-olds in the U.S.) It’s a worthwhile move, equity analyst Michael Queller said, that differentiates Snapchat’s content from YouTube or Facebook’s Watch shows, which are longer and include older stars like Tom Brady and Will Smith. “Everyone is glued to their phones with limited attention span, so the three- to five-minute video content seems like a good way to keep a user engaged,” Queller said. “Plus if they like it, it’s likely they’ll watch multiple, then tell their friends to watch too. So it’s a good way to get people spending significant time on your app and wanting to open it again to see new content.” That’s the key here: Snap needs to not only add more users but keep them on the app longer — something compelling content will help drive. More users spending more time on Snapchat will lead to more ad sales and bigger quarterly revenues. There are already signs the strategy is paying off. Snap introduced several new shows last fall, including “Endless Summer,” a Bunim/Murray-produced docuseries following Orange County social-media stars Summer McKeen and Dylan Jordan. Sean Mills, Snap’s head of original content, said Thursday the show was a “hit” for Snap after its release, pulling in 28 million unique viewers. Its release also coincided with Snap’s best quarter ever from a sales standpoint, indicating there is real synergy between how show performance and revenues. “In the past several months, Snap has been able to stem the tide of users washing out. Now it’s not just about customer retention, it’s about real growth,” Creatv Media head Peter Csathy said, adding that new games and shows could help to attract and retain new users. Those new offerings include an upcoming daily news show from BuzzFeed as well as several scripted series featuring high school or college-age leads. That’s by design, with a Snap executive saying on Wednesday the company is especially focused on adding international users between the ages of 13 and 24. Adding video games fits that course of action as well. Snap introduced six games on Thursday, among them a game where users fend off a zombie apocalypse and another where users, using their Bitmoji cartoon avatar, perform a variety of challenges with their friends. The games are designed to be played with your friends on Snapchat, where users can quickly invite people they know to play alongside them. At the bottom of the screen is Snap’s chat box. Fostering a communal aspect is a wise approach — as Fortnite’s billion-dollar revenues show  — and gives Snap another way to hit its users with ads, including 6-second commercials running between game levels.

You’re invited to Bitmoji Party ? #SnapPartnerSummit pic.twitter.com/WBTntkqZil

— Snapchat (@Snapchat) April 4, 2019

But analysts are mixed on whether gaming will ultimately be a winner for Snap. Queller said he has “doubts” about the gaming push because of stiff mobile competition, adding he thinks “Snap will likely spend more money developing shows and games than the additional advertising revenue will generate, making it a losing proposition.” Csathy, on the other hand, thinks gaming, like shows, will lead to “deeper engagement” and give users more reasons to open Snapchat. That’s critical for Snap, after Instagram, its chief competition, has essentially copied several of Snap’s most famous features, like Stories, in recent years. While the games are ad-supported to start, Csathy could see Snap introducing in-game purchases, similar to Fortnite, if they gain traction — something that could boost Snap’s bottom line even more. “This isn’t only an ad game. Let’s not forget that so-called ‘free’ games aren’t really free. The big win is to successfully introduce ‘free to play’ games filled with micro-transactions,” Csathy said. “If Snap can accomplish that, then not only is new growth and engagement possible, but also real game-changing, so to speak, revenue generation at a whole new level.” Ultimately, Snap’s bet on original shows and games makes sense; the company is working to combat a full-blown assault from Instagram, while fending off newer upstarts like Tik-Tok that are all competing for the same finite amount of time young users have.