Snapchat Partners Amazon, Strengthens E-commerce Strategy

Snap Inc. SNAP, the parent of camera-application Snapchat, recently announced that it is rolling out a new feature that will enable people to use the app camera for searching products on Amazon AMZN.

With the help of Snapchat’s camera, users can scan a product or a barcode, which then displays a card showing that product and similar ones available on Amazon. On tapping the selected item, users will be redirected to the app or the web portal where they can complete the transaction.

Reportedly, Snap isbringing the feature first to a small percentage of domestic users and will roll it out to other countries eventually.

How is Snap Poised to Benefit?

Snap is evolving into a social platform from a mere photo or video sharing application and its e-commerce strategy is a step toward that direction.

Notably, Snap’s visual product search feature will help to create diverse offerings for its audience rather than restricting them to a messaging platform. Moreover, collaborating with a bigwig like Amazon will help the company attract more users.

We note that Snap is leaving no stone unturned to turn around its fortunes. The company’s daily active users (DAU) decreased by nearly 3 million sequentially to 188 million in the second quarter of 2018. North America DAU was 80 million, down 1.2% sequentially.

Management stated that the sequential decline was due to the lower usage of the Snapchat application, primarily due to the redesign, which received significant negative response.

The decline is a concern as it makes the platform less attractive to advertisers. We note that advertisements contribute significantly to the company’s revenues.

The new partnership may therefore become a new revenue stream for the company. Although no financial details regarding the tie-up have been shared by the companies, Snap might earn a transactional fee placed on the orders originating through its platform.

Furthermore, the camera search feature will help Snap compete directly with Pinterest’s Lens, a similar tool that recognizes objects and brings up related content.

Most importantly, it will help the company compete with Facebook FB owned, Instagram which is now allowing users in 46 countries to shop directly from Stories posts, a feature that the social media giant has been testing since June. Additionally, Instagram announced the launch of a Shopping tab in the Explore page that will expand globally in the coming weeks.

Snap Inc. Price

Snap Inc. Price | Snap Inc. Quote

Zacks Rank and A Key Pick

Currently, Snap has a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology sector is Paycom Software PAYC, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Paycom is currently projected to be 25.5%.

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