Why Snap’s foray into gaming may be a ‘defensive’ move

JP Mangalindan
Chief Tech Correspondent

If the social-media company Snap (SNAP) enters gaming, as one report suggests, it may be be viewed as a move to keep competitors at bay and some of its current users from getting their gaming fix elsewhere.

Wedbush Securities analyst Michael Pachter contends Snap’s upcoming foray into gaming this fall, as reported by The Information, is hardly “revolutionary,” but merely another way for the messaging app to keep current users engaged for longer periods of time. According to the report, the Venice, California-based company plans on launching the gaming platform this fall — with at least one unnamed gaming publisher confirmed to develop a game for it.

“I think of it [gaming on Snapchat] more as being defensive,” Pachter explains. “They’re offering something other services are offering, and they’re just trying to make sure they don’t lose customers because somebody wants to play Battleship or pool with their friends.”

Snap could launch a gaming platform for Snapchat this fall,

A spokesperson for Snap declined to comment on the reports that it’s entering gaming.

Gaming on Facebook and WeChat

Gaming on messaging platforms isn’t anything new. In November 2016, Facebook (FB) released Instant Games, which lets users play a bevy of simpler, more casual games, including “Words with Friends,” “Everwing,” “Uno” and “Solitaire.”

The social network does not break out how Instant Games is doing with users, nor does it disclose overall revenues for its gaming platform. However Chris Benjaminsen, founder of the web and mobile gaming company FRVR, told Yahoo Finance that several of the company’s titles have each generated over $1 million since Instant Games launched. And while several million dollars in revenues generated since November 2016 obviously isn’t a huge amount by any stretch, the FRVR founder views his company’s efforts on Facebook as part of a longer game and expects revenues to grow substantially in the years to come.

Last December, WeChat saw its major gaming success with the release of the jumping game “Tiao yi Tiao,” which more or less translates to “Jump Jump.” The game reportedly snagged 100 million daily users within two weeks of its release, spurring WeChat owner Tencent to open up its Mini Program platform earlier this year so outside developers could create games for the messaging app, as well. Now, nearly 40% of Tencent’s revenues come from purchases that users make on virtual goods inside games.

Will Snap do this right?

Given Snap CEO Evan Spiegel has long admired Tencent as a “role model,” it’s logical Spiegel wants Snapchat to follow Tencent’s lead with gaming. The big question is whether Snapchat will do it right. Although Snapchat remains a popular app with 191 million users in the last quarter, Spiegel and Snap have fumbled on several occasions more recently. Its much-ballyhooed Spectacles — a pair of camera-equipped sunglasses — initially sold well below expectations, to the point that Snap took a $40 million write-down on unsold glasses.

Meanwhile, a major app redesign late last year reportedly spearheaded by Spiegel drew widespread criticism, ultimately hurting Snap’s revenue growth and user numbers during the first three months of 2018. The company released an official update in mid-May that backtracked on portions of the redesign to help assuage angsty users.

Pachter views gaming on Snapchat as just one more feature among many others. But if Snap hopes to replicate a fraction of WeChat’s own early success, it needs support from at least several major publishers at the start, who develop tried-and-true staples for those seeking the familiarity of games on other messaging platforms, as well as addictive originals that help Snapchat stand apart.

Benjaminsen, for his part, tells Yahoo Finance FRVR plans on having at least one title ready for Snapchat’s gaming platform when it arrives this fall.

“We have a strategy of ‘being everywhere,’ of being no more than 3 clicks away from a user,” he explains, adding that Snapchat remains a compelling platform for its younger users despite recent missteps.

That’s little indication of whether gaming on Snapchat will actually have longevity, but it’s a start.

JP Mangalindan is the Chief Tech Correspondent for Yahoo Finance covering the intersection of tech and business. Email story tips and musings to jpm@oath.com. Follow him on Twitter or Facebook.

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