Casual gaming was one of the first prominent use cases for Facebook in the early days, allowing game developers like Zynga to cash in on the growing platform. While there are still games on the world's largest social network, payments and other fees accounted for a mere 1.4% of Facebook's revenue last quarter, as the company worked hard to turn mobile ads into a nearly $40 billion business.
Maybe Facebook neglecting games could be an opportunity for Snap (NYSE:SNAP)?
They'll probably be AR games
The Information reports that the Snapchat parent is planning to push into gaming, turning Snapchat into a gaming platform for third-party developers later this year. The company launched Snappables just a couple months ago, augmented reality (AR) lenses that allowed users to play selfie games with friends. Selfie games are mobile games that can be played using your face to control the game.
Snap reportedly already has one gaming publisher onboard and will undoubtedly work to grow its stable of developer partners. The report does not specify that the new gaming platform will revolve around AR, but that's a pretty safe bet, as Snap established itself as a first mover with AR technologies, and the company's product development teams have been prioritizing it ever since.
It's also worth noting that Snap acquired British developer PlayCanvas last year, which was working on a 3D graphics engine, according to Business Insider. Gaming seems to have been on the company's mind for a little while.
Learning from Tencent
CEO Evan Spiegel is looking to emulate Tencent's (NASDAQOTH:TCEHY) wild success, which has turned WeChat into a vibrant messaging platform capable of everything from e-commerce to banking to casual gaming. Many Western tech companies have tried to implement similar models with limited success, perhaps because of differences in user behaviors.
Tencent bought a 12% stake in Snap late last year, and Snap has tried to copy it in other ways, too. Unlike some of Tencent's other investments in U.S. companies, most of which are passive, Tencent has suggested that it could be an active investor that helps advise on strategic matters.
"The investment enables Tencent to explore cooperation opportunities with the company on mobile games publishing and newsfeed as well as to share its financial returns from the growth of its businesses and monetization in the future," Tencent told Reuters in an emailed statement in November.
This all comes as mobile platform operators have been aggressively pushing and promoting AR experiences, including gaming. Apple spent a fair amount of time highlighting AR games at WWDC earlier this month, for instance. With tech giants on the same side in advocating for AR adoption, Snap could leverage that growing interest -- starting with games.
Evan Niu, CFA owns shares of AAPL, FB, and Tencent Holdings. The Motley Fool owns shares of and recommends AAPL, FB, and Tencent Holdings. The Motley Fool has the following options: long January 2020 $150 calls on AAPL and short January 2020 $155 calls on AAPL. The Motley Fool has a disclosure policy.