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What’s Cooking between Snap and Zero Zero Robotics?

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Aug. 11 2017, Updated 7:36 a.m. ET

The exclusive drone vendor

Reports emerged recently that Snap (SNAP) is in talks to acquire consumer drone manufacturer Zero Zero Robotics, a Chinese company (MCHI). Zero Zero Robotics makes camera-centric drones that can be used to shoot selfies. The drones, called Hover Camera Passport, come with facial recognition and gesture control features. The foldable flying camera drones cost $500. Earlier this year, Zero Zero Robotics entered an agreement to make Apple (AAPL) the exclusive vendor of its drones.

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Snap acquired drone maker Ctrl Me Robotics

In the consumer drone market, Zero Zero Robotics is battling for market share against DJI and GoPro (GPRO). DJI’s close competitor to Zero Zero Robotics’ Hover Camera Passport is the Spark drone, which costs $500. GoPro’s camera-centric drones command higher prices.

Earlier this year, Snap acquired drone maker Ctrl Me Robotics, and the rumored talks with Zero Zero Robotics signal its growing appetite for drone technology. Expanding into the consumer drone business could help Snap diversify its revenue streams beyond the online advertising industry, which is a crowded and highly competitive market.

Diversifying revenue streams

Though Snap describes itself as a camera company, it relies on its social media app Snapchat for the majority of its revenues via advertising. Thus, Snap is in constant competition with Facebook (FB) and Alphabet’s (GOOGL) Google for marketers’ budgets.

The company is already into the hardware business through its Spectacles device, and a drone venture would help grow its hardware revenues.

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