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Straight Talk Media & Entertainment

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Snapchat (now Snap Inc., “a camera company”) recently introduced Spectacles. This marks an interesting expansion for a software company into the hardware space (akin to endeavors such as the Facebook phone and Google Glass) and creates a potential challenger to the outdoor footage–focused GoPro. The Spectacles glasses are activated by touch, allowing users to record 10-second videos through a 115-degree lens at eye level. These videos are then wirelessly transferred via Wi-Fi for Android or Bluetooth/Wi-Fi for iOS to the Snapchat app. Snapchat will diversify its revenue streams through Spectacles, and its progress within the space may set the precedent for similar moves in the wearables market.

A novelty that needs the support of the young and affluent

Snapchat’s daily active user count is hovering around 150 million, and the majority of its users fall into the young millennial and millennial category. This demographic is also the one most likely to adopt Spectacles because the hardware is designed to be “trendy” and “fun” – two words that most appeal to 13–25-year-olds. However, given their polarizing design and $130 price tag, Spectacles seem to be targeting a narrow segment of the market (at least initially): teenagers and young adults who are affluent.

Because Snapchat is associated with fun and silliness, it makes sense for it to create hardware focused on the younger demographic. Spectacles are more likely to see mass adoption than hardware such as Google Glass because product reception is typically higher among millennials than it is for more technical products with a technology-savvy consumer base (e.g. developers and early adopters).

As with GoPro and basic activity bands, product simplicity is another feature that will help stimulate demand among millennials. Simplicity is the antithesis of the multifeatured, much more expensive (i.e. $1,500), and now withdrawn Google Glass. By the end of 2017, Ovum projects the amount of registered Spectacles users to exceed 550 million. If we assume that 10% of these users will purchase Spectacles, Snapchat’s revenues will increase by $7.15bn (from $540m total revenues in 2015). The potential for revenue growth across both application and hardware – with optimized advertising and product refinement strategies – will be large.

The success of Spectacles will be attributable to simple functionality and trendy design. However, the adoption of the product may be stunted due to the price tag deterring otherwise interested millennials. Product use cases may also be limited by weather conditions – especially since many consumers do not view sunglasses as versatile items. If Snapchat decides to market the product past the experimental stage and happens to find success, competitors within the wearables market will soon follow. The market’s low barriers to entry and the high cost of Spectacles will ensure that other vendors (both established and emerging) will do their best to undercut the price to gain market share among the younger demographic.

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