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SNAP to Take on TikTok With Spotlight Feature for Snapchat

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Zacks Equity Research
·4 min read
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Snap SNAP recently introduced an entertainment-based feature on the Snapchat app called Spotlight, where it will highlight creative short videos from users, in an effort to compete with China-based ByteDance’s TikTok app.

Spotlight features auto-playing vertical videos, which can be swiped up or down to quickly move between clips.  It is designed to highlight entertaining videos from all users, regardless of the number of followers or influence they have.

The new feature is available in the United States, Canada, Australia, New Zealand, UK, Ireland, Norway, Sweden, Denmark, Germany, and France.

Markedly, Snap shares declined 2.1% to close on $44.29 on Nov 24, following the announcement, apparently reflecting strong competition Spotlight is expected to face from TikTok.

Snap’s shares have returned 171.3% year to date compared with the Zacks Internet - Software industry’s growth of 89.4%.

Snap Inc. Price and Consensus

Snap Inc. Price and Consensus
Snap Inc. Price and Consensus

Snap Inc. price-consensus-chart | Snap Inc. Quote

Private Accounts to Restrict Popularity of Spotlight Videos

On Snapchat, likes are private with no options for re-sharing of videos. Moreover, displaying follower numbers is optional. Without such metrics, it can be tough for Spotlight videos to get popular, thus affecting chances of users to get noticed by brands and advertisers or get hired to create sponsored content.

Additionally, Spotlight content will be moderated by human reviewers and AI before it gets to 100 views and will not be distributed further until it has passed moderation.

Snapchat user profiles are individual by default, so snaps will not be instantly pressed to a big audience. Moreover, those who share Snaps from a private account will also see their account details remain private on Spotlight. Public comments on videos are not allowed.

Nonetheless, the company confirmed that as an early incentive for users to try out the new feature, it will give over $1 million dollars every day until the end of this year to those who create the most engaging Snaps on Spotlight.

Markedly, users must be over 16 and where applicable get parental consent to be considered for the funds.

Spotlight to Intensify Competition for Peers

With over 249 million daily active users reported at the end of third-quarter 2020, Snap is looking to leverage more than 4 billion daily Snaps created by its users to power the new Spotlight feed.

Creative video-sharing has become increasingly popular on social media platforms, accelerated by the rise of TikTok, which remains one of the top apps with around 50 million daily active users (DAUs) in the United States till August.

TikTok plans to spend more than $1 billion in the next three years on video-makers in the United States. Over the weekend, TikTok saw its first creator reach 100 million followers. Charli D’Amelio has hit that mark just 18 months after she created her account.

TikTok’s success led Alphabet GOOGL owned Google to add short-form videos to its YouTube app. Meanwhile, Facebook FB has added an equivalent function in the type of Reels for Instagram.

Instagram has been paying some of TikTok’s top stars to test out Reels. Moreover, Instagram recently started sharing revenues for the first time on video ads with creators like YouTube does.

Nonetheless, Snap is expected to intensify competition for its peers, given its strong popularity among millennials. Competition among social media apps for the attention of younger users has been intense and most notable is the case of Snapchat’s disappearing Stories feature, which has since then been introduced to LinkedIn, Facebook, Instagram and WhatsApp, as well as Twitter TWTR earlier this month.

Markedly, in the United States, Snapchat platform reaches 90% of 13-24 year-olds, which is more than Facebook, Instagram and Messenger combined. It also reaches 75% of all 13 to 34-year-olds and more than 4 billion Snaps are created every day on an average.

Moreover, with the music licensing aspect handled by this Zacks Rank #3 (Hold) company’s multi-year licensing agreements with several major record labels including Warner Music Group, Universal Music Publishing Group, Warner Chappell Music, Kobalt and BMG Music Publishing, the Spotlight feature is expected to gain popularity soon.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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