In Revenue Diversification, Snap Looks beyond Spectacles


Sep. 12 2017, Updated 7:36 a.m. ET

Spectacles sales plunge

Snap (SNAP) is keen to diversify its revenue streams beyond online advertising. The online advertising space is a crowded and highly competitive industry where Snap is battling forces such as Alphabet’s (GOOGL) Google and Facebook (FB).

Spectacles, the camera-equipped eyeglasses with a $130 price tag, is one of Snap’s products designed to help the company become less reliant on advertising sales. In 2Q17, Spectacles’ sales totaled $5.4 million, down from $8.3 million in 1Q17, signaling weak demand for the device. The drop in Spectacles sales has left some wondering whether Snap’s revenue diversification efforts are stalling.

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Snap looking to drones and payments for new revenues

Snap had expected Spectacles to launch the company into the AR (augmented reality) economy, which could be worth more than $100 billion by 2024. However, it’s important to note that Spectacles is only a piece of Snap’s revenue diversification drive.

The company is also hunting for non-advertising revenues in the drone and mobile payment markets. As part of its push into the drone business, Snap acquired drone manufacturer Ctrl Me Robotics earlier this year. Rumors have also swirled in recent weeks that Snap is in talks to acquire Zero Zero Robotics, a Chinese consumer drone manufacturer.

Snap could be preparing Snapcash for prime time

Goldman Sachs Research predicts that the consumer drone market could be worth $3.3 billion by 2020, up from $700 million in 2014. The chart above illustrates this growth projection.

On the mobile payment scene, Snap launched a peer-to-peer payment service called Snapcash in 2014. Snapcash is based on the infrastructure of digital payment processor Square (SQ), a company that shares its CEO, Jack Dorsey, with Twitter (TWTR). In recent months, Snap has appeared to be courting PayPal (PYPL) in what could be a preparation to expand Snapcash’s reach.


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