Snap unveiled its fifth-generation AR glasses, which include a $99/month developer membership, amidst a $1.3 billion net loss in 2023.
TakeAway Points:
- Snap Inc. revealed Spectacles, the fifth-generation AR glasses that are available to developers for a $99 monthly subscription.
- Snap’s main ad business is struggling with a 20% share decline following poor quarterly results despite the introduction of a new product.
- With $131.9 billion in sales and better-than-expected quarterly performance, Meta is still the industry leader in AR/VR.
Snap launches new AR glasses
Snap Inc. has introduced the fifth generation of its Spectacles augmented reality (AR) glasses, aiming to overlay digital graphics onto the physical world. These new Spectacles are currently available only to developers, who must commit to a $99 monthly subscription for one year to build AR apps for the device.
The glasses offer more advanced digital visuals than previous versions and operate on a new software system called Snap OS. Additionally, Snap has partnered with OpenAI, the creator of ChatGPT, to provide developers with tools to integrate artificial intelligence features into the smart glasses.
Evan Spiegel, Snap’s CEO, unveiled the new glasses at the company’s annual Partner Summit in Santa Monica, California. Spiegel emphasized the potential of AR technology, stating, “Hundreds of millions of people are using AR on the Snapchat application. But a lot of the feedback we’ve gotten over the years, and a lot of what we’ve felt, is that it’s really bound by screens. To really unlock the full potential of AR with glasses is something that’s really exciting to us.”
Competitive environment
Snap’s announcement comes just days before Meta’s Connect event, where Facebook’s parent company typically unveils its latest hardware. Meta has been a significant player in the AR and VR space, with its Reality Labs unit posting a $4.5 billion loss in the second quarter.
Despite these losses, Meta’s advertising business remains robust, generating $131.9 billion in sales for 2023 and a net income of $39.1 billion. In contrast, Snap reported $4.6 billion in total revenue and a net loss of $1.3 billion for the same year.
Leo Gebbie, a principal analyst and director at CCS Insight, commented on the competitive dynamics, stating, “We are at a point where the challenge with Snap is that it is just functioning at a different scale than Meta.” Gebbie also noted that for Snap to compete effectively, its AR device must be “something really impressive” that leverages the best features of its core Snapchat app and appeals to its younger demographic.
Economic Outcomes and Market Response
Snap’s core online advertising business has been struggling, with shares falling more than 20% after the company reported its latest quarterly results in August. Investors were disappointed by weaker-than-expected guidance for the third quarter, and the company’s revenue for the second quarter fell short of analysts’ expectations. In contrast, Meta reported better-than-expected quarterly results, sending its stock price up by 7%.
Snap has faced challenges in its hardware efforts as well. The company debuted its first internet-connected Spectacles glasses in 2016 but had to write down nearly $40 million due to unsold inventory. Subsequent versions of the glasses, including a $380 model in 2019 and a limited-release AR version in 2021, have also struggled to gain traction.
