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Snap Thinks It Can Do Shopping Better Than Instagram

By Adam Levy - Sep 27, 2018 at 6:07AM

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There's just one major hang-up for the new Visual Search feature.

Snap (SNAP 4.59%) thinks its app can be used for a lot more than sending funny-looking selfies to friends. The company is slowly rolling out a new feature called Visual Search, which allows users to point their phone at an object or bar code and receive information about the product from (AMZN 2.07%).

Snap's new feature follows Facebook's (META 1.70%) Instagram, which recently introduced new shopping features, including the ability to shop from Stories and the Explore tab. Instagram is also considering a stand-alone shopping app.

Visual Search has the potential to provide a new source of revenue for Snap, but the company will face a significant challenge to get users to change their behavior.

Screenshots of Snapchat's Visual Search in action.

Snap's Visual Search in action. Image source: Snap.

What is Snapchat for?

Snap's Visual Search feature is curious. Management had never indicated that people were using Snapchat to find and shop for new products.

By contrast, shopping for items on photo-sharing apps like Instagram and Pinterest is a common behavior, and management at both companies has frequently shared information about shopping behavior on those platforms.

To be a success, Visual Search will require users to think of Snapchat differently than they have in the past. And Snap's history at getting users to change their behavior, even slightly, isn't great.

Snapchat's redesign rollout at the beginning of the year saw significant backlash, as Snap tried to separate communication with friends from media consumption in its app. Snap has seen its daily active users decline since February, when it completed the rollout.

The behavior change of Visual Search isn't quite as obstructive as the redesign. It'll require users to think of Snapchat when they see an interesting item out in the wild, instead of another app like Amazon's, for example. In fact, Amazon has had its own visual search capabilities in its app for several years. It's been able to identify products based on smartphone photos since 2016.

And Amazon's mobile user base has plenty of overlap with Snapchat's. Millennials named the Amazon app as one of the top three they can't live without. 

The Instagram approach

Instagram isn't trying to wedge shopping into its app; it's a behavior that its users have long pursued. Third parties developed ways for users to learn more information about products well before Instagram even served advertisements. Influencers would change their profile links and mention the product in the photo's description if they posted something they wanted their followers to check out. The Instagram user base was shouting at Instagram to make it easier to shop for the things users saw in the app.

Instagram's push into shopping, therefore, has been much more organic. It follows Facebook's playbook for monetizing apps. It creates connections between consumers and businesses first, and then it gives businesses more ways to connect with consumers.

Snapchat is skipping the part where it connects users with businesses, and it's struggling to find ways to monetize the platform without annoying users. Management has never provided a straight answer when analysts ask how much room there is to increase ad load. That might be because it's found the majority of users skip the ads they do see, leading to poor return on investment for advertisers.

The move to try to integrate Amazon product listings as part of the camera app is an effort to connect users to a business. In theory, it's an excellent strategy to create a more-natural ad experience within Snapchat. Amazon pays a commission between 1% and 10% to referral partners, depending on product category, so there's a clear revenue opportunity. But in practice, it will require Snap to do something it hasn't had success with in the past: changing user behavior.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Amazon and Facebook. The Motley Fool owns shares of and recommends Amazon and Facebook. The Motley Fool has a disclosure policy.

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