Snap Inc.’s long awaited IPO has finally arrived and it’s led to deep scrutiny of Snap’s products and future. Snap is known for its ability to innovate, widely disseminating the concept of disappearing messages with its social media app, Snapchat, as well as interactive lenses for social sharing. However, Snap’s software is not its only stand-out product. Its most significant development is Snapchat Spectacles, a hardware companion to Snapchat’s app.
At $129 or so, Spectacles are relatively budget-friendly and hit Snap’s reputation for the funky and cool right on the mark. Now available online (and just in time for summer), Spectacles are sunglasses equipped with a video camera that allow users to take pictures and videos discreetly. Moreover, users will be able to upload content recorded on Spectacles wirelessly to their synced Snapchat accounts. Spectacles is just the first generation of hardware products produced by Snap, but it is indicative of Snap’s intention to grow as a camera and hardware company.
We examine the potential for Snap’s first piece of hardware to give investors an idea of what to expect on Snap’s hardware growth. Based on our projection, Spectacles will be the next $5 billion tech project. In our analysis, we first looked at adoption rates over four years of popular hardware projects that launched to an existing user base. For example, Apple launched Apple Watch to iPhone users, or Amazon launching Echo to Prime subscribers. For Snapchat Spectacles, we assumed a first year adoption rate of 1%, as opposed to much higher adoption rates of 3%, 6%, and 18% of the Apple Watch, Amazon Echo, and the Samsung VR rig respectively (see Adoption Rate Analysis).
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Next, we assumed Spectacles’ growth trajectory to be similar to that of the iPhone. In our first scenario with an adoption rate of 1% 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). To compare with other major tech products, we also found Spectacles’ gross revenue using 5%, 10%, and 20% adoption rates. A 5% adoption rate would achieve $1.9 billion in gross revenue with 15 million units sold, and with a 20% adoption rate, Spectacles would gross $7.5 billion with 58 million units sold (Scenarios 2-4).
Infographic source: MediaKix