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Summary

Snapchat’s recent Chat 2.0 update sends a clear signal to the communications world that the five-year-old company is set to go beyond ephemeral messaging to provide a full range of media-rich communications services that appeal to a wider audience.

Chat 2.0 will ensure mass appeal beyond Snapchat’s current user base

Although chat is an important component of Snapchat, the real heroes of the service will always be video and photo. Chat 2.0 uses chat as the starting point for a more media-rich interaction. It allows users to transition from chat to a video call to sending audio and photos. In May 2015, Snapchat revealed that its 100 million daily active users viewed over 2 billion videos per day. According to Bloomberg, Snapchat users were viewing 6 billion videos per day in January 2016. By end-February, this had reportedly jumped to 8 billion.

By assimilating a wide range of communications services, Chat 2.0 will ensure mass appeal beyond Snapchat’s current user base. Chat 2.0 allows users to send a wide range of stickers, audio messages, and video messages, as well as send photos while a call is in progress. Also users can seamlessly switch between video and audio calls as well as primary and secondary cameras during a video call. Along with overhauling its chat services, Snapchat has improved its Stories feature, which allows users to share their daily experiences with the Snapchat community, either through pictures or videos. This content-sharing model works for brands as well through Snapchat Discover. By restricting the number of brands, Snapchat promises a high level of engagement from its users to the brands. It can also charge a premium for the brand space.

Snapchat has a small but highly engaged user base. It is also important to keep in mind that 100 million users account for the 8 billion video views each day. Rival Facebook also has 8 billion daily video views – but from an estimated 1.59 billion users. Although Snapchat is clearly a “sticky” service, its user interface is a barrier to entry for many people. Snapchat has moved away from a menu-based model (which was copied by other chat apps) and relies heavily on swipes to work the service. This is not intuitive for late adopters, who are used to a menu-style model. However, there is a high level of interest in the service, and Snapchat tutorials flood the Internet.

Increasing users in emerging markets is a challenge for Snapchat owing to the data-intensive nature of the service. The heavy use of videos and photos works best in markets where data access is fast and reliable. As data connectivity increases in emerging markets the access issue will ease, but it will still slow down growth for Snapchat.

Video and photos will continue to have a profound impact on the communications market. Younger users are highly engaged users of Snapchat and other demographics are slowly beginning to adopt the service. Telcos and other chat apps should ensure that their services and apps follow Chat 2.0’s example and offer users a media-rich experience.

Appendix

Further reading

2016 Trends to Watch: Communications Services, TE0003-000894 (January 2016)

OTT Communications Tracker: 3Q15, TE0003-000889 (December 2015)

The Regulatory Position on Telco–OTT Partnerships, TE0007-000925 (July 2015)

Telco–OTT Partnerships Tracker: 1H15, TE0004-001033 (July 2015)

“Video, music, and social media dominate telco–OTT partnership deals,” TE0003-000829 (February 2015)

Telco–OTT Partnership Series: Netflix and Pay-TV Operators, TE0003-000805 (November 2014)

Author

Neha Dharia, Senior Analyst, Consumer Services

neha.dharia@ovum.com

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