While Snap’s (NYSE:SNAP) “Spectacles” glasses turned into a debacle and the reworking of its Android app was an unwanted solution to a problem that didn’t exist, Snap (NYSE:SNAP) may be on to something with its new mobile-gaming venture. The 4% gain that SNAP stock logged on Friday indicates that investors agree with that idea.
On Thursday, the parent company of messaging app Snapchat unveiled its new gaming platform at its first-ever partner summit. A total of six games will be immediately available via Snapchat. Users will be able to play the games with their contacts within the app itself. One of the six games was developed by Snap itself, while ZeptoLab and Zynga (NASDAQ:ZNGA) also developed games.
More games may be on the way, though Snap is more interested in quality than quantity.
The end goal, of course, is to improve the Snapchat app’s user-engagement metrics by using the games to entice people to look at the app longer. Snap may have just found a way to accomplish that goal .
Natural Progression
Though once on the fringe of video gaming due to its limited computing power and slow download speeds, mobile gaming has come to the forefront of the gaming world. Driven by better hardware and faster wireless data speeds, the mobile gaming market was worth $77 billion last year.
The gamers who dominate that market overlap tremendously with Snapchat’s target demographic.
“In the United States, Snapchat now reaches nearly 75% of all 13 to 34-year-olds, and we reach 90% of 13 to 24-year-olds,” explained Snap CEO Evan Spiegel, who went on to say at the summit, “In fact, we reach more 13 to 24-year-olds than Facebook or Instagram in the United States, the U.K., France, Canada and Australia.”
Spiegel probably had no choice but to enter the gaming arena.
Facebook (NASDAQ:FB) has offered mobile (and desktop) gaming options for years, and doubled down on the idea in late 2016 with the launch of its Gameroom platform The platform offers a myriad of high-quality games that go well beyond casual’ gaming.
Some of the company’s games can be played directly from a chat screen.
Just a few weeks ago, Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) announced it would launch its own streaming game platform. Called Stadia, the subscription-based service will rely on Advanced Micro Devices’ (NASDAQ:AMD) chips to deliver console-quality gaming experiences without the need of a console or gaming computer.
Still, Snap intends to make its take on mobile gaming distinctly different by playing into its strengths.
The Same, But Different
Even within the casual-mobile-gaming arena, there are multiple multiplayer games. Each of them has its limitations, though. For example, Fortnite is a free-for-all multiplayer game that’s too intense for some, while Words With Friends is limited to two players.
Snap is putting the “social” back in social media gaming. Snake Squad is a battle-royale game a la Fortnite, but its cartoonish feel makes it fun rather than stressful. Bitmoji Party allows several people to play at one time, as they work through a variety of “mini games.'” C.A.T.S.: Drift Race plays an awful lot like a multiplayer version of popular racing game Mario Kart, from Nintendo (OTCMKTS:NTDOY).
Console maker Nintendo, by the way, has tiptoed into the mobile gaming market as well, posing a threat to the attention users were devoting directly to Snapchat. The launch of Pokemon Go in 2016 was a smashing success, and though the company wasn’t pleased with the market’s response to the 2017 launch of mobile game Super Mario Run, the game inspired 200 million downloads.
The $64,000 question owners of SNAP stock are asking is, “How will Snapchat make money from its games?”
SNAP doesn’t appear to be married to this idea, but initially, it will sell ads to monetize the games, showing short videos before users begin playing them.
The Outlook of SNAP Stock
It’s easy to enter the mobile-gaming arena. It’s more difficult to swipe market share from rivals. Even more difficult than that is making the venture a profitable one. It also takes time to really figure out the games — and the kinds of games — that users will respond to. It could take several quarters for SNAP to get “good” at the gaming business.
Still, this is a savvy step in the right direction for SNAP stock. Internet users have made it clear that their favorite things to do online are fighting about politics and using games as a means of forgetting about politics.
With the mobile-video-gaming market worth $77 billion now, and growing at a brisk clip, SNAP’s move certainly could make SNAP stock much easier to own in the foreseeable future.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.
