Snapchat parent Snap (NYSE:SNAP) is the latest social media specialist to try to take a bite out of TikTok's surging popularity. Yesterday, the company announced a feature called Spotlight, which will become a new section of the app designed to highlight viral videos. Investors cheered the news, sending shares to record highs.
The never-ending cycle of social media companies replicating rivals' best features continues.
Shining a light on viral content
Snap is soliciting its users to submit their "best video Snaps" to Spotlight, enticing them with the possibility of a monetary payout if their submission goes viral. Through the end of the year, the company is allocating $1 million per day that it will split up and distribute to creators based on the number of unique views attributable to each submitted Snap. Users must be at least 16 years old to be eligible for a payout.
Spotlight is initially launching in 11 countries -- the U.S., Canada, Australia, New Zealand, the U.K., Ireland, Norway, Sweden, France, Germany, and Denmark -- before expanding to other regions in the future.
Snapchat is already a heavily visual platform, with users frequently taking photos and videos to send as messages or share through Stories. In that sense, Snapchat is already fairly similar to TikTok in some ways, but Spotlight will be a moderated section of the platform that seeks to find viral content as opposed to more mundane daily updates. Public comments will not be allowed on videos in Spotlight.
That means Snap is setting aside about $39 million to promote Spotlight, a modest amount compared to the nearly $850 million in revenue that analysts expect the company to generate in the fourth quarter. Snap has been making impressive gains in monetization lately, with average revenue per user (ARPU) jumping to a record $2.73 in the third quarter.
Spending $39 million as effectively a marketing expense to boost engagement could easily pay off handsomely. Those costs may or may not technically be booked as sales and marketing, since Snap plans to advertise in Spotlight and the company might fund the payouts with ad revenue. In other words, the payouts may be accounted for as revenue sharing, which is a cost of revenue instead of an operating expense.
The copying cycle continues
Snap pioneered the Stories format that has overtaken just about every social media tech platform, most recently including Twitter Fleets, which officially launched last week after several months of testing. Facebook has been particularly aggressive in its efforts to copy features from competitors across its family of platforms.
TikTok's meteoric rise, combined with the fact that its fate in the U.S. remains in geopolitical limbo, makes it a particularly compelling rival for U.S.-based companies to copy.