Mar 23, 2023
Snap Offers AR Shopping Product for Retailers’ Websites
(Bloomberg) -- Snap Inc., the parent company of video-messaging app Snapchat, is launching its first product line aimed at business customers.
The company is adapting the augmented reality technology behind its popular filters and lenses — tools that can add glittery makeup or cartoon eyes to someone’s video selfie — to help retailers use AR on their own websites and apps. These technologies would let users try on clothing, footwear and accessories virtually on a retailer’s site, in order to consider a purchase.
Snap already sells advertising on its app that involves trying on products virtually, an offering that gained traction during the pandemic when retailers were closed. “We’re basically taking that same technology and helping customers leverage it on their website,” said Jill Popelka, head of AR enterprise services at Snap.
Until now, Snap has relied mostly on advertising revenue from Snapchat, which has 750 million monthly active users worldwide. But Snap is in the midst of one of the biggest strategic shifts in its history. Last year, the company laid off 20% of its staff and cut projects that don’t contribute to growing revenue and users, or its AR technology. This new offering, for which Snap will take a monthly fee, could help make up for a slowdown in advertising revenue.
Many of Snapchat’s young users try on clothing, footwear or beauty products while considering a purchase on the app. Since January 2021, more than 250 million people have used Snapchat AR Shopping Lenses more than 5 billion times.
The company is calling its new business offering AR Enterprise Services or ARES. The first product, called Shopping Suite, will help retailers create 2D and 3D representations of their merchandise, store the digital assets and enable AR on their own websites. Shopping Suite will roll out first to fashion and clothing companies, followed later by home and beauty.
Dozens of customers have tried Shopping Suite so far, including apparel brands Goodr, Princess Polly and Gobi Cashmere. Snap says those brands have seen increased conversions and decreased returns of merchandise.
Some brands, such as luxury retailers Christian Dior and Louis Vuitton, have been hesitant to use AR because the 3D representations of their products were low quality, according to Popelka. Snap is reassuring retailers that its technology has addressed those concerns, and can more accurately reflect the glare on a pair of sunglasses or the texture of footwear, she said.
The shift from building products for consumers to selling them to enterprises isn’t easy, but can lead to critical recurring revenue if it works out.
Earlier this year, after making a series of changes to its advertising products, Snap projected its first ever quarterly revenue decline. Snap and its peers are still dealing with a 2021 change in Apple Inc.’s privacy policies that made it harder to personalize and track the success of digital ads on iPhones. Coupled with a choppy economy, the digital ad market has faced a year-long slowdown.
In response, Snap, Twitter, Meta Platforms Inc. and others have worked to diversify their revenue, with varying degrees of success. Twitter Blue, a premium version of Twitter, is estimated to have less than 300,000 subscribers, while Snapchat+ has 2.5 million subscribers, and is on track to generate $100 million in revenue.
Snap has been aggressively pursuing its AR strategy for years, but as the digital advertising market continues to slump and spending tightens, Snap will have to prove its AR technology is worth the cost. Marketers are under more pressure than ever to focus their spending on opportunities that show an immediate and traceable return, like driving sales or email sign-ups.
Popelka said she’s confident that the AR tools will increase shoppers’ confidence in their purchases.
“There are a lot of people that are trying new augmented reality things, however this is proven technology,” she said. “We know it performs at scale.”
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