Snap Wants to Make the World Your Shopping Mall

Snap (NYSE: SNAP) is looking to use your smartphone camera as a visual search engine. A code snippet buried in the Snapchat Android source code reveals Snap is developing a visual product-search feature in Snapchat, according to a TechCrunch report. The feature will be able to identify products by barcode or use image recognition to identify an object and find similar products. Snap will link customers to (NASDAQ: AMZN) to buy items right from their phone.

The idea isn't entirely original. Pinterest, for example, released a similar feature last summer. But with its advanced augmented-reality capabilities, Snap could prove adept at recognizing objects and matching them with product listings on Amazon.

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The advertisements are the content

Facebook (NASDAQ: FB) has one of the most familiar models of native advertising. The simplest Facebook ads are regular posts that a Page has opted to "boost" — i.e., share with people who might be interested in the content.

Instagram has taken it one step further. Even before the photo-sharing platform had native advertisements, users with a strong following would advertise for brands. Ads on Instagram simply capitalize on the existing behavior of its users. BTIG analysts recently wrote, "Instagram is quickly becoming the most powerful and valuable mall in the world where you not only browse, but can buy anything you see." (Indeed, that's one reason I believe Instagram could be worth more than Facebook.)

Snap is aiming to take that one step further still. Not only would a visual product-search feature enable users to shop anything they see in the app, but combined with Snap's technological capabilities, it could let people shop for anything they see in the world. Think of it as a Shazam for handbags and neckties. Point the camera at an object and you'll see all the product details in short order.

Using Amazon's expansive product database (which has 100 million Prime-eligible items) Snapchat could help its users find pretty much anything they're looking for. Amazon offers advertisers a small commission for referring shoppers to products. A company the size of Snap may be able to negotiate for affiliate fees, but Amazon isn't exactly wanting for millennials — Snap's biggest audience. More millennials point to the Amazon app, more than any other app, as one of the three top apps they can't live without. So there's not a lot of leverage for Snap to garner better rates.


Can visual search really differentiate Snapchat?

Snap has had a difficult time staying a step ahead of Facebook. Instagram copied its Stories feature a couple years ago, and the copy is now twice as big as the original. And the WhatsApp version of Stories is even bigger.

In Snap's registration filings with the SEC, management wrote that the only way to differentiate its product is to innovate. Snap will lean heavily on image recognition capabilities developed through its augmented reality work in order to make visual product search work. That said, Facebook also has extensive image recognition capabilities (mostly used to automatically identify offensive content or people in pictures).

Facebook is also building up its augmented reality capabilities. In fact, it recently unveiled a new ad unit it's testing that allows users to see what they'd look like wearing certain products — in other words, augmented reality ads. Facebook is certainly capable of putting together a visual search feature just as good as Snap's.

But Snap may have a real advantage. Where Facebook's products focus on serving content first and producing content second, Snapchat opens directly to the camera, waiting for the user to take action. For users who want to capture the world around them quickly, Snapchat may provide a better experience.

Providing a product-search experience could also result in higher overall engagement as users share photos of the things they saw and are thinking about buying. The company recently suffered a setback in user growth, so finding a new way to engage users could reinvigorate the rest of the product as well. It's certainly worth keeping an eye on how Snap and its competitors approach this feature.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Amazon and Facebook. The Motley Fool owns shares of and recommends Amazon and Facebook. The Motley Fool has a disclosure policy.

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