Snap Inc. has an IPO on the way and the company known for disappearing messages has been quickly preparing by assembling and releasing new features for advertisers on its social app. However, what may be the most significant new development is Snapchat Spectacles, the state-of-the-art hardware companion to the Snapchat app.
Priced at US$129, Spectacles are sunglasses equipped with video camera technology that allow users to take pictures and videos that upload seamlessly through Wi-Fi or Bluetooth to a connected Snapchat social media account. Spectacles are the first generation of hardware products produced by Snap Inc., and are indicative of Snap’s intention to grow as a camera and wearables company.
With a current user base of 150 million and a forecasted growth rate of 27% in the U.S. alone, Snapchat will arrive at 280 million monthly active users globally by 2020 (see Snapchat user Ggowth in our infographic below). Suffice to say, the user base of Snapchat is currently largely based on its popularity with millennials and Generation Z. However, wider app adoption within older audiences will also contribute.
We project that Snapchat Spectacles is the next $5 billion tech product. In our analysis, we first looked to the adoption rates (from launch to year four) of popular tech hardware products that launched to an existing user base. For instance, Amazon debuting its smart speaker Echo to its Prime subscribers. Adoption rates for the Apple Watch, Amazon Echo, Samsung VR, and fitness trackers were 3%, 6%, 8%, and 18%, respectively (see adoption rate analysis). For Snapchat Spectacles, we assumed a first year adoption rate of 1%.
In our first forecast scenario, we assumed the growth trajectory of Spectacles to be similar to that of the iPhone. At a 1% adoption rate in 2017, Spectacles would reach $1.4 billion in gross revenue by 2020 with 11 million units sold (see projected revenue for 2020 - market penetration).
The potential for Spectacles in gross revenue based on the adoption rates of other major tech products was also determined (see projected revenue for 2020 - sales). We found the gross revenue of Spectacles using comparable 5%, 10%, and 20% adoption rates. A 5% adoption rate would see $1.9 billion in gross revenue with 15 million units sold, 10% adoption rate would see $3.7 billion in gross revenue, and at a 20% adoption rate, Spectacles would gross $7.5 billion with 58 million units sold (scenarios 2-4).
By Evan Asano, founder of influencer marketing company Mediakix