Snap (NYSE:SNAP) recently launched Spotlight, a new platform for user-created videos within Snapchat, in nearly a dozen countries. The new feature will curate the "most entertaining" Snaps from Snapchat users and broadcast them to viewers based on their preferences and favorite videos.

To encourage users to create interesting content, Snap will distribute over $1 million every day to top content creators through the end of the year. This seems like a clear bid to steal the spotlight from ByteDance's TikTok, but will it pull users away from the popular short video platform?

Why is Snap chasing TikTok?

Snapchat and TikTok both target Gen Z users, but the two platforms generally weren't considered direct competitors. Snapchat mainly hosts private ephemeral conversations and stories, while TikTok's platform encourages users to share public videos in hopes of going viral.

A young woman takes a selfie.

Image source: Getty Images.

But Snap is gradually creeping into TikTok's backyard with more public content. Three years ago, it launched Snap Map, which lets users publicly share their Snaps to an interactive map. Earlier this year, it let users add music and various sounds to their Snaps, which paved the way for more creative Snaps. It also significantly expanded its Discover tab with original scripted shows and added more social games and AR filters to lock in users.

Meanwhile, ByteDance wants to expand into the messaging market. It already offers direct messages in TikTok, and it launched a stand-alone messaging app for Douyin (the Chinese version of TikTok) called Duoshan last year. Duoshan integrates Douyin videos into its messaging platform, and it looks like a Snapchat clone -- so it could only be a matter of time before TikTok launches a similar app for overseas users.

ByteDance also covets Snapchat's users. That's why TikTok was actually Snapchat's top advertiser last year, according to MediaRadar, and it outspent other big spenders like Coca-Cola and Disney.

But despite those efforts, 34% of U.S. teens still ranked Snapchat as their favorite social media platform in Piper Sandler's latest "Taking Stock with Teens" survey, putting it ahead of TikTok (29%) and Facebook's (NASDAQ:FB) Instagram (25%).

Snap also continues to grow: Its daily active users rose 18% year over year to 249 million last quarter, and its average revenue per user jumped 28%. It's still dwarfed by TikTok, which reaches about 850 million monthly active users worldwide, but it also isn't withering in its shadow.

But can Snap pull users away from TikTok?

Nonetheless, Snap's Spotlight still needs to overcome two main obstacles to gain ground against TikTok.

Three young girls take a selfie at the mall.

Image source: Getty Images.

First, it needs to enlist top influencers to compete against top TikTok stars. Second, it needs to encourage Snapchatters to create higher-quality content instead of the various "slice of life" short videos that are often featured on Snap Map.

By offering cash, Snap hopes to spark the creation of better videos that have better chances of going viral. But Snap says only a "small percentage" of creators will receive payments, and only after a Snap has accumulated over $250 (based on a proprietary payment formula) in a single day. If it doesn't cross that threshold, the creator gets nothing, and the total is reset.

Snap hasn't revealed how it calculates that total, but it could be higher than TikTok's average rate of about $0.90 per 1,000 views. Many of TikTok's top stars, including Charli D'Amelio and Addison Rae, already have millions of followers on Snapchat, so Snap's offer might convince them to create some new Spotlight videos. Some budding content creators might also consider Spotlight a less crowded space than TikTok.

Assuming Snap actually pays out over $1 million per day to the end of 2020, $30-$40 million could be a small price to pay to capture some of TikTok's content creators and viewers. Snap still isn't profitable yet, but analysts expect its revenue to rise 42% to $2.44 billion this year.

A smart way to organize its Snaps

Snapchatters take over 4 billion Snaps daily, most of which are private and ephemeral. Snap Map prodded those users to share more public videos, but Spotlight could accelerate that change by putting top content creators on a pedestal and paying them more cash.

Stifel Nicolaus analyst John Egbert recently called Spotlight a "thoughtful adaptation of a TikTok-style destination for content that could reenergize public content creation on Snapchat and create valuable incremental ad opportunities." I agree with that overall sentiment, but Snap still faces a tough uphill battle against TikTok and other clones like Instagram Reels.

For now, it's impossible to tell if Snap could steal the spotlight from TikTok. However, investors should stay tuned for further updates over the next few quarters and see if it's making meaningful progress in public videos.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.