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Is Snap's Snapkit Developer Platform a Threat to Facebook?

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Snap (SNAP - Free Report) , which has so far been hesitant in allowing third-party developers on the platform, seems to be following the footsteps of other tech companies like Facebook (FB - Free Report) , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) who are keen on improving developer relationship.

Per a recent report by TechCrunch, Snap is working on its first developer platform called Snapkit that would enable other third-party applications to offer login using Snapchat credentials. Moreover, to make it more appealing to the masses, Snap will let users use their Bitmoji avatars on other platforms.

Apart from that, Snapchat is also working on a feature that would enable developers to access Snap’s camera and its augmented reality (AR) features. “The idea is the photos and videos shot with the camera could then be used in that app as well as shared back to Snapchat”, adds TechCrunch.

In December, the company launched an application called Lens Studio to design and build AR lenses for Snapchat, thereby grabbing the attention of developers.

How is Snap Poised to Benefit?

Snap has been trying hard to get into a better financial shape after its failed attempts to impress investors. Shares of the company have had a rough time since the company went public in March 2017. Snap’s current market cap is $13.27 billion while its pre-IPO valuation was about $25 billion. This implies that the company has lost nearly 47% of its value since going public.

Notably, lackluster user addition, decelerating revenue growth and departure of key executives in critical situations have dampened investor confidence in the stock. Snapchat’s sole dependence on advertising revenues is a concern for investors. In addition, its popularity only among a particular segment (teenagers) of the demography is alarming.

Besides, Facebook’s strategy of mimicking Snapchat’s feature to boost user growth and engagement levels has been successful, with the social media giant making them more popular than Snapchat.

We believe that by bringing itself to wider third party applications, the company will be able to target other age groups, increase their interest level and thereby draw more users.

Will it Impact FB?    

Facebook is used by application developers to build apps and websites that target its massive user base of 2.2 billion. The company provides a number of free tools to developers.

In March, Facebook rolled out monetization options to all developers by adding in-app purchases and advertisements on Instant Games platform. By monetizing Instant Games, the company will be able to boost its non-advertising revenues.

Moreover, post the Cambridge Analytica data scandal, which impacted 87 million users, the social media giant introduced tools to help developers safeguard user privacy by restricting access to the amount and kind of user information.

At F8 2018 developer conference, the company announced a number of new products to help developers build “new experiences”. Notably, the company brought the AR camera platform to Instagram, Messenger, and Facebook Lite in order to connect them with a larger global audience.

Facebook also mentioned that its community of global developers, launched in F8 2017 with around 10k members, has increased to 100k developers across 54 countries.

Although Snap seems to be cashing in on Facebook’s data scandal by providing users with an alternative option to log in, given Facebook’s growing initiatives it is unlikely to overshadow it.

Notably, shares of Facebook have gained 21.9% in the past year while Snap shares lost 50.8% over the same time frame.



Taking Cue From Google, Apple

Apple has been undertaking a lot of initiatives to make the platform more attractive to developers. The company’s launch of ARKit — the world's largest AR platform — helps third-party developers to work on creating AR experiences for its iOS platform. Moreover, integration of machine learning with Core ML in building apps is also attracting developers to the platform.

Google’s 2017 I/O saw the company improving on developer centrism. Instead of big-bang product announcements to impress customers and the media, Google opted to be more informative for developers and help them better understand its technological improvements.

Zacks Rank

Currently, both Snap and Facebook have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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