Share prices for Snap (NYSE: SNAP), the company that created the Snapchat social platform, rose nearly 4% this week after an Evercore ISI Research analyst upgraded his prediction of the stock’s performance based on the revenue potential of Snap Games.
Launched in April 2019, Snap Games allows Snapchat users to play games through the mobile app’s chat bar while talking with friends via text or voice. According to The Motley Fool, the Evercore report estimated that advertising through Snap Games could bring in $350 million in annual revenue by 2022, generating 12-18% of the company’s total earnings. While Snap has yet to release numbers, CEO Evan Spiegel said the platform was “off to a great start” during the company’s Q2 earnings call on July 23.
“We designed our gaming platform to support gameplay with real friends and are excited to see early results showing the value of these social interactions,” Spiegel said. “For example, we see a direct correlation between the number of friends playing a game together and their time spent playing games. While we are just getting started building out our new gaming platform, we are learning a lot and can’t wait to continue evolving the platform to serve our partners and community.”
Players can earn currency or upgrades within games by watching short ads. Whether that ad revenue can meet analyst expectations will likely depend on Snap’s ability to continue growing its games library, which is currently limited to seven titles. Snap has developed two games using players’ bitmoji avatars and has partnered with companies including social gaming powerhouse Zynga (NASDAQ: ZNGA) and New Zealand-based mobile studio PikPok to round out its offerings. The platform does have a wide variety of genres including a battle royale, racing, puzzle, and sports. Spiegel said in the earnings report that the company is focusing on user retention to prove the concept to publishers before working to scale up the platform.