Can it help the company monetize its 500 million users?
Augmented reality may be taking “try before you buy” to a whole new level.
AR allows apps and companies to virtually bring a version of reality onto consumers’ devices — and there’s growing interest within the social media world to start selling products in this new reality. As social media companies have matured and found their user base, they are increasingly turning to e-commerce to grow revenues.
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Last week, Snap and Universal Music Group partnered to expand the music catalogue on the video platform in a multiyear global deal. Snapchat users can use UMG’s entire catalogue of recorded music and content in its Sounds and AR Lenses tools.
That’s just one of the ways Snapchat has been slowly integrating AR on its camera app. The company said Snapchat Lenses AR experiences have been part of its repertoire since 2015, and it introduced features where people can try on products, everything from shoes to makeup. Brands including Gucci and Sally Hansen have been using it.
“They’re all about adding a fun, entertaining element to your Snaps,” Snap rep Jessica Allen said via email.
Some 200 million users engage with their AR daily, according to Snap, and AR activity is growing — especially during the global pandemic when more people turned to shopping online.
“We saw livestream shopping accelerate during COVID-19 when traditional brands had to find creative solutions to reach customers virtually,” said Stephanie Chan, mobile insights strategist at Sensor Tower. “Snapchat is certainly competing with platforms, such as TikTok and Instagram to grab not only the attention of retail brands but also to offer broader feature sets to augment the user experience. For Snap, the benefits include growing its ecosystem and generating more user spending and ad revenue.”
In last year’s earnings call, Snap CEO Evan Spiegel pointed to e-commerce advertising as a growth area: “Certain industries … like e-commerce have benefited from some of the COVID-related changes in consumer behavior, and have been leaning in as advertisers on our platform.”
Snap bills itself as a camera-focused company. The strategy around AR and other immersive technologies is a part of the company’s broader effort to build out its e-commerce business. At its 2021 Partner Summit in May, Snap announced plans for a series of AR-powered features coming up that would help the company monetize and diversify.
Compared to other platforms, Snapchat stands out when it comes to using immersive technologies, particularly because its app experience is centered around filtering and adjusting people’s images.
“Snapchat is the one platform that has made AR the centerpiece of how you engage, right from the start with filters and lenses,” Debra Aho Williamson, analyst at eMarketer, said. “It’s become a key utility to shopping, like virtual try on. Does this shade look good on me? Does this shoe look good on me?”
Among Snap’s other new features is a wrist-tracking technology, which lets people use AR to try on watches and jewelry, and business profiles that let brands promote their posts and AR Lenses. Other upcoming changes will let Snapchat users try on products and see how they would look, IRL. Users will also be able to use their voice and gestures to control and cycle through different items, like saying “next” or waving their hands.
Shopping trends seem to confirm that e-commerce will continue to dominate. Last year, eMarketer tracked 78.9 million social buyers, or people who bought something directly off a social platform or followed a link to purchase at least once a year. By 2023, that number is expected to grow to 102.1 million people, based on the company’s projections.
“We definitely think the pandemic spurred this trend of online shopping, especially social commerce,” Williamson added.
Much like its social media rivals, the majority of Snap’s revenue comes from its ads business. And companies from BuzzFeed to YouTube have also stepped up their e-commerce game lately. In BuzzFeed’s case, its plan to go public is based on estimates from a projected profit of $117 million in the next year that will mostly be driven by e-commerce.
And as it is commonly seen in the tech industry, companies tend to follow in each other’s footsteps. After Snapchat rolled out developer tools for its third-party apps in Spotlight, TikTok put out a similar feature called Jumps. There are countless other examples when it comes to social media trends, including short-form videos now widely seen across Instagram, YouTube, TikTok and Facebook.
“As social media platforms continually approach parity with each other in terms of features, the winners will ultimately be determined on who can deliver the most engaging and relevant user experience for their target consumer,” Chan said.
Last month, Snap said it marked 500 million monthly active users, a metric it had not previously released. That’s up 22% from the previous year but still a fraction of Facebook’s 2.8 billion monthly users. On the commerce side, Facebook reported some 300 million monthly Shops visitors and 1.2 million monthly active Shops.
Facebook is similarly interested in using immersive tech, including AR and AI, to drive the shopping experience on its platforms. On Instagram, which is owned by Facebook, users can “visualize” merchandise using AR experiences before they purchase. This year, the company is testing a visual search driven by AI that will let people find similar products using images. Facebook also owns Oculus, the virtual reality headset company.
Facebook this month expanded its Shops product to WhatsApp and Marketplace, allowing users and businesses to buy and sell on its platforms with Facebook Pay options. As incentive, Facebook said it will continue waiving fees for business sellers through June 2022.