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Can Snap’s Spectacles 3 Win the Hearts of Snapchat Users?

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Aug. 14 2019, Updated 12:04 p.m. ET

Snap’s (SNAP) photo and video sharing app, Snapchat, announced its new Spectacles 3 on August 13. Spectacles 3 are Snap’s latest smart glasses. They’re lightweight and made out of stainless steel, and they come in carbon black and rose gold. Spectacles 3 can be preordered starting today, and they’ll begin shipping in the fall.

According to a report from Cheddar in 2018, Snap had planned to launch its third generation of Spectacles by the end of that year.

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Earlier versions of Snap’s Spectacles

Snap has been trying to make money from Spectacles, but it’s failed in the past. The company has launched two versions of Spectacles: one in 2016 and another in 2018.

The company reportedly sold just 220,000 pairs of the much-hyped first version of its Spectacles. According to another source, less than 50% of buyers used the Spectacles per month. The company wrote down nearly $40 million in sunk costs for the first version.

Snap’s Spectacles 2 were water-resistant. Moreover, Spectacles 2 owners reportedly captured 40% more videos than the owners of the first version. However, according to CNBC, Spectacles 2 weren’t very attractive. Also, the process of transferring videos and photos was slow. Though Snapchat didn’t incur any losses for its Spectacles 2 model, the company didn’t gain significantly either.

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Can Spectacles 3 become a hit among users?

Like the first two versions, Spectacles 3 will allow users to capture photos and videos, but the new model has a dual camera, which will add depth to images. Unlike the previous versions, Spectacles 3 can shoot 3D videos and pictures and share them with friends. The 3D camera will enable users to take photos and videos from different angles and save them on the app.

However, Spectacles 3 aren’t water-resistant, and they’re also costlier than the previous two versions. Spectacles 3 will be priced at $380, much higher than the introductory prices of Spectacles and Spectacles 2, which were $130 and $150, respectively. The higher price point could help the company cover its costs and boost its revenue, but whether the new device will win the hearts of Millennials is still in doubt.

Snap stock is currently trading in the red. It was down more than 2% during today’s trading session as of 9:54 AM ET. The stock had, however, gained more than 200% on a year-to-date basis as of August 13.

Snap’s efforts to push into augmented reality

The company’s new smart glasses are an effort to push into the fast-growing AR (augmented reality) space. Snap users love Snapchat’s AR features, which let them add effects to Snap images. Snap users can also add different effects on the photos and videos saved on the app using Spectacles.

In its recently reported second quarter, Snap added 13 million daily users, of which 7 million–9 million were AR lens users. The company’s next generation of AR lenses was a hit and was used by over 200 million Snapchatters in the first two weeks. Then, last week, Snap announced that it would raise around $1.1 billion to fund AR and other investments.

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Other tech giants in the AR space

Like Snap, iPhone maker Apple (AAPL) is also betting big on AR features. Apple is reportedly planning to launch its own smart glasses in an AR push. Facebook (FB) is also working on an AR solution to help people type hands-free. Alphabet (GOOGL) also stepped into the AR space with a new version of Google Glass.

According to Mordor Intelligence’s estimates, the global augmented reality market was worth $0.35 billion at the end of 2018. Further, the global AR market is expected to grow at a compound annual growth rate of 151.93% between 2019 and 2024.

Snap’s user base growth

Snap is growing its user base for the second consecutive quarter in a row. The growth is coming from the improvements in its new app for the Android operating system. The improved app increased the number of Snaps by 7% compared to the older version. The retention rate also improved by 10% for new users.

For the third quarter, Snap expects to have daily users in the range of 205 million–207 million. This daily user expectation is higher than last year’s 186 million.

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