Snap (NYSE:SNAP) doesn't always want to be a distant fourth-place player to Facebook (NASDAQ:FB), Instagram, and Twitter (NYSE:TWTR). It's betting that Minis -- third-party developer apps that will live within Snapchat -- will help it break out. Given the runaway success of a similar offering in China, Snap might be on to something here.
In 2019, more than 300 million people spent $115 billion on Mini Programs -- up 160% year over year -- within WeChat, China's hugely popular messaging app. It doesn't hurt that Tencent (OTC:TCEHY), the Chinese tech stock that owns WeChat, is also a Snap investor.
Snap bets on shared experiences
In its first developers' conference this month, which Snap was forced to take virtual because of the COVID-19 pandemic, the tech stock rolled out a series of new features to keep developers busy and (hopefully) customers engaged on its platform. Among these offerings, Snap Minis have drawn particular attention.
These miniature apps within SnapChat will enable users to do various things together -- meditate, shop, or purchase movie tickets, for instance. Snap is betting that the next era of social media will be all about group interactions, rather than a person texting and scrolling alone.
In a recent interview with The Verge ahead of its inaugural developers' conference, Snap CEO Evan Spiegel pointed to the ability to enable shared experiences via Minis as unique to social media in the U.S. "One of the cool things about Minis is it takes these little things that are actually frustrating, and take a lot of time to do and are pretty siloed, and just makes it easier to do and more fun to do with your friends," Spiegel told The Verge.
The CEO pointed to purchasing movie tickets as one example. As it stands, friends wanting to see a movie have to text back and forth to decide the film, theater, time, and then go purchase tickets. But with Minis, a few clicks within the chat will be all it takes. Spiegel also envisions a Mini that enables users to shop for, say, a prom dress together, or meditate alongside each other within SnapChat.
If these Minis take off, they can also help differentiate Snap from TikTok and Facebook, and boost ad sales. The more Minis Snap has, the more opportunities it has to sell ads, as more users spend a longer amount of time on its platform.
That's not to say Snap's success is guaranteed. Much larger rival Facebook tried to build apps within its own Messenger, but they were never a hit -- the technology was too clunky back in 2016. At the time, the social media giant relied on chatbots and text-based commands for its miniature apps, and it didn't pursue Snap's angle of sharing with other users.
Snap is already testing shared experiences via Snap Games. This in-app gaming platform launched last spring, enabling up to five people to play games within a text chat. Since launching, more than 100 million users have played Snap Games at least once. Snap Minis are built on the same technologies and principles as Snap Games.
Snap may have a tougher time than WeChat luring developers
Snap is taking a page from WeChat with Snap Minis, but it's not clear whether the latter will be as successful as the former. For one thing, Snap will have to get developers to make mini apps for the platform. The size of WeChat's audience makes that task easier; it had more than 1.2 billion monthly active users as of the end of the first quarter. The Chinese messaging app also had a bigger built-in audience to start with -- around 930 million users in January 2017, when it first rolled out its own mini apps. That figure dwarfs Snap's current 229 million daily active users.
In the U.S., Apple and Alphabet's Google run the dominant app stores, providing developers with the broadest reach. It's not clear how Snap will share revenue with the third party developers. For example, Snap is launching the ability to purchase movie tickets within Snapchat, teaming up with Atom Tickets to make that happen.
As for social media, given that Facebook has more than 2.5 billion active users -- more than 10 times Snap's current audience -- developers may focus on creating programs for Facebook rather than Snap Minis. Still Snap does have a lot of younger users ranging from 13 to 24, a coveted group for advertisers. In the U.S., Snap said, 75% of its users are between the ages of 13 and 34.
Snap is chasing shared experiences with Snap Games and Snap Minis, which may initially limit the use cases to activities that require group participation such as purchasing show tickets, planning a vacation, sharing and comparing class schedules, creating flashcards to study for the next test, or shopping for an event. But if Snap stands out in the hard-to-reach 13-to-34 age group as a result, it could increase engagement on its platform and thus advertising dollars, providing it with another growth avenue for the years to come.
Investors looking for a reason to hold on to shares of Snap should pay close attention to advertising sales in the months and years to come. If Minis become the hit that Snap is betting on, that part of its business should grow.