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Straight Talk Media & Entertainment

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Chat apps continue to drive the progression of visuality in communications services, building on enablers such as smartphones with high-quality cameras and high-speed data networks, in order to cater to the basic human desire to share conversations and experiences visually. Through features such as emojis and stickers for text-based messaging services, filters and lenses for image-based services, and video calling and video chat, chat apps have played a key role in introducing and popularizing multiple types of visual communications service. The use of augmented reality (AR) in visual communications services appears to be the next step in terms of both product development and monetization, with both Snapchat and Instagram having recently added AR-based lenses and filters.

Launched in April 2017, Snapchat’s World Lens product is an AR feature that applies 3D lenses (incorporating images such as rainbows, clouds, and flowers) to photos and video captured by the mobile phone’s rear-facing camera, with the overlaid images appearing bigger or smaller as the mobile user moves around. This week, Snap made World Lens ad formats available to brands in the US and Europe, with Warner Bros. first out of the gate, followed closely by Netflix. Warner Bros. is using a 2D World Lens ad format to promote its new movie Everything, Everything, and in the coming weeks Netflix plans to use World Lenses as part of its marketing campaign for new comedy series GLOW.

Snap’s decision to move quickly to monetization with World Lens probably builds on its growing expertise in creating ad formats around new services, but there is also an imperative: Snap’s less-than-stellar 1Q17 results. Snap fell short of revenue expectations, bringing in $149.6m in the quarter instead of the projected $158.6m, even though revenues grew 286% year on year. To add insult to injury, Snap also reported a $2.2bn net loss (due to costs associated with its February IPO), and slowing growth in daily active users (DAUs), at 36% year on year, compared with 52% in the year-ago quarter.

On the plus side, however, the launch of World Lens demonstrates that Snapchat continues to set the bar for creating innovative visual communications services that drive customer engagement, and this is borne out by Ovum’s Digital Consumer Insights 2017: Communications, Commerce, and Media survey. The survey found that Snap and Instagram ranked highly in terms of time spent on specific media-sharing apps on mobile devices, with 62% of respondents in the UK and 60% in the US indicating they used Snapchat all day or 3–5 times a day, while 50% of respondents in Japan, 47% in the UK, and 42% in the US said they used Instagram all day or 3–5 times a day. Even though Snapchat has far fewer DAUs than Instagram – 166 million, compared with an estimated 300 million – the survey data suggests that a higher proportion of Snapchat users engage with the service frequently, making it an attractive platform for brands and media companies.

The survey also showed that in general, there is a trend among consumers toward using more visual forms of communications. For instance, the proportion of respondents sharing images, video, and other types of content via an app on their mobile phones has increased significantly since 2015 in Japan, the UK, the US, and especially in China, where WeChat holds significant share (Figure 1). Furthermore, in all four markets, the number of respondents making video calls on chat apps has overtaken the number of respondents making VoIP calls – especially in China, where 74% of chat app users make video calls, compared with 60% who make voice calls.

Ovum has identified the following key trends in visual communications, which are likely to prevail, if not intensify, over the coming years:

  • Text-based messaging: Emojis and stickers are widely available in chat apps and other types of communications services. Predictive emoji features make it easier for non-emoji users to participate in emoji-based conversations, and the widespread usage of emojis is such that they are also being used by brands in marketing campaigns, including those on social media. Consumer and brand use of emojis and stickers will continue to grow, as both formats become more accessible to consumers, and as brands continue to look for ways to effectively engage with their target audiences.
  • Image-based messaging: In this segment of the market, the catchphrase is that imitation is the sincerest form of flattery. Service capabilities that are developed by innovative companies such as Snapchat, and that prove popular with consumers, are copied by competitors before eventually becoming hygiene factors for the service. This scenario has already played out numerous times, with Facebook-owned Instagram most recently following Snapchat into the AR space.
  • Video calling: As of now, video calling is mostly offered by and used on chat apps. The growth of video calling on chat apps means that users are becoming more comfortable with using video-based communications services on their devices. This comfort level will extend into other forms of video usage and consumption, including the creation or sharing of video clips or video live-streams via services such as, Facebook Live, and Instagram Live.
  • Augmented reality and virtual reality: Initial forays into AR-based communications capabilities, such as Snapchat World Lens and Instagram Face Filters, will probably also extend into more immersive AR- and/or VR-based communications services. For example, consumers could share a virtual world or setting – for example, strolling through New York’s Central Park – while they have a conversation.

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