Snap's plans to take on Asia amid growing competition

Snapchat is one of the early pioneers of the short-video format, and for several years it dominated this space relatively unchallenged. But the US-founded company now faces stiff competition from a whole cohort of apps that have gained a significant foothold in Asia-Pacific from the outset. As it announces plans to formally enter Asia-Pacific, is it too late for the 9-year-old app to cut through?

Launched in 2011 as a ephemeral photo-sharing app, Snapchat's growth catapulted when it developed the 'Stories' format in 2013, in which users could string together Snaps into a longer narrative. The ability to craft narratives from short-form 'chapters' became a defining innovation for Snapchat, and has completely altered social media as we know it today. The 'Stories' feature overtook private Snaps in terms of usage within six months. Snapchat's next major innovation came in 2015 with the launch of 'Discover', a feature that allowed publishers to curate channels of short-form content. Snapchat has since doubled-down on its content offerings, launching TV-quality short-form 'Snapchat Shows' and 'Snap Originals'.

Snapchat's user growth ballooned between 2014 to 2017 as it continued to roll out new features and invest in product innovations like its 'Spectacles' smartglasses in 2016. In the same year, short-video rival Vine was shuttered by its owner Twitter, an opportunity for Snapchat to scoop up its creators. But there was a major threat on the horizon: Instagram, which in August 2016 launched a carbon copy of Snap's popular 'Stories' format. In just 25 weeks Instagram Stories had reached 150 million daily users and overtook Snapchat's entire userbase by early 2017.

Instagram's aggressive growth tactics and a controversial redesign of Snapchat's interface in 2017 meant the app began to see growth slow and users leave for the next few years. After two consecutive quarters of losing users in 2018, it stabilised in 2019.

A significant proportion of the platform's user growth has come from its 'Rest of World' region, which includes Asia-Pacific. Since Q2 2019, the 'Rest of World' region has been the highest-growth region for daily active users by a significant mark, growing by 45% year-on-year in the first quarter of 2020 (this slowed to 37% YOY growth in Q2, likely as a result of the Covid-19 pandemic).

Recognising the importance of the region in its future growth prospects—with an estimated 483 million social-media users in Southeast Asia alone—in June Snapchat's parent company Snap outlined plans to grow its presence in Asia-Pacific, hiring its first Singapore-based employee with plans to open a regional hub in the city state once the Covid-19 pandemic eases. At the same time, ANZ leader Kathryn Carter was given an additional remit to oversee Southeast Asia and Hong Kong as general manager.

Campaign Asia-Pacific caught up with Carter over Google Meets to discuss the social-media platform's plans to grow its community of users and advertisers in the APAC region.

Carter acknowledges that the platform has been "relatively quiet" in the region until this year, as it has been focused on growing its offering in its home market and Europe. In the absence of on-the-ground staff, APAC is the company's lowest-revenue region, despite APAC accounting for the highest user growth. Revenue from 'Rest of World' fell to US$70 million in Q1 of this year from a peak of $87 million in Q4 2019, and fell again in Q2 to $69 million.

According to Carter, Snap has been deliberately slow to formalise its presence in APAC "because we want to ensure that we're very thoughtful when we enter into any market".

"In particular across the APAC region, recognising the various different cultural nuances required across each of the different markets to ensure that the Snap experience in Indonesia felt locally relevant, for example, and having considered plans to ensure that we are able to scale," she says.

"That type of thoughtfulness takes time to ensure that we're able to really understand the different markets that we're entering into and build, develop and innovate the appropriate solutions across each of those markets while still remaining true to what Snap is inherently."

While it focuses on developing its local partnerships and product offerings, Snap doesn't have any major marketing plans to shout about its entrance into the market, according to Carter.

Snap's strategy for acquiring users in Asia has been to strike relationships with local telcos like Indonesia's Indosat and Malaysia's Maxis and Celcom. Under the arrangements, the telco customers can use Snapchat data-free and also have access to exclusive lenses. 

It has also localised its product offerings. In the past 12 months, it has rolled out augmented-reality lenses for holidays such as Chinese New Year, Thaipusam, Vesak Day, and Kartini Day as well as event such as Java Jazz festival and Football Association of Malaysia matches against Thailand and Indonesia. 

The tech platform has conducted various 'Lens Studio' workshops at local secondary schools and universities across Malaysia and Indonesia over the past year to support the development of AR skills in the region.

As a result of its investments, Carter says the region is home to a growing number of verified 'Snap Stars' across fitness, music, fashion, and lifestyle categories. 

The pandemic that has swept through the world this year has presented logistical challenges when it comes to hiring staff and setting up an office in Singapore, Carter says. But Covid-19 has also brought about significant spikes in social-media penetration.

"The climate that we're in has really emphasised the power of visual communications," explains Carter. "When people are physically distant, the ability to make people virtually close through the camera and through image-based communication has really resonated with our community across the world and across the region."

While Snapchat's daily active users slowed from Q1 to Q2 this year, Carter says the platform recorded an increase in usage of features like video calling, Snap Games, consumption of AR and content.

Growing competition

But the platform now faces tough competition from hugely popular Chinese-owned short-video app TikTok, which has reportedly been downloaded 200 million times in Southeast Asia alone. In comparison, Snapchat had a total 77 million users in its 'Rest of World' as of Q2 2020. There's also US-owned Triller—which recently struck a major partnership with Reliance’s JioSaavn music app in India—plus local rivals like Bigo and Likee. In tandem, established rival Instagram has continued to innovate with the launch of its short-video 'Reels' format in India in July, followed by YouTube's short video bid Shorts last month.

Carter says growing competition in the short-video industry is "positive", as it means advertisers have "recognised the importance of mobile as a format and the generation of mobile consumers". Snap's premium content offering via its Snapchat Shows and Snap Originals is what differentiates it from other platforms in the space, she asserts.

When questioned whether heightened competition from the likes of TikTok and Instagram has made it challenging to have commercial conversations in the region, she says: "It's been incumbent upon us since day one to be educating our advertising community and more broadly our user community around the power of Snap and what it is we stand for."

"What we've been focused on is the creation of premium content, both through our partnerships with a range of the world's best storytellers and some pretty formidable brands, as well as our foray into TV-style made-for-mobile content."

Charles Tidswell, the VP of JAPAC at social-media marketing firm Socialbakers, suggests that while TikTok has been a runaway success with users, that hasn't always translated to commercial accomplishments. 

"TikTok has been active in the region for over three years, but brands have found it challenging at a creative level," he says. "The question is, will Snapchat present the same challenge?"

In Asia, Snap plans to use Singapore as a springboard to "build advocates" among regional clients and agencies.

"We're looking forward to formalising relationships with agencies and marketers across the region, both those who are familiar with us from a global perspective, and also introducing the Snap platform to new local advertisers," says Carter. Asked whether the company plans to set up a dedicated agency team likes its rival TikTok, she says: "We are currently exploring what the best resource model looks like."

Carter is confident that Snapchat's performance marketing chops and ability to delivery efficiency for ad spend will land well with the region's cost-conscious advertisers.

"The region is very successful in terms of performance advertising, in the current climate more than ever marketers are needing to justify, substantiate and validate the investment that they're making across any of their media investments," she says. "Performance marketing has always been really core to what we do—so we're excited about the potential to spearhead that across the region in particular areas such as ecommerce."

Beyond performance marketing, it offers brand-building awareness-lead activities through formats like sponsored augmented-reality lenses and filters, Carter says. Snapchat's client base covers "everything from your traditional brands through to digital natives as well", she adds.

Socialbakers' Tidswell predicts that until Asian marketers have tried and tested Snapchat, they "will be unlikely to invest in filters and lenses unless they are heavily discounted".

That doesn't mean Snapchat will fail to find traction, Tidswell hastens to add, as the company has already begun to develop relationships with major clients in the region.

"Whether it's global brands looking to target audiences in Asia or Asian brands looking to diversify from WeChat and TikTok, Snapchat has already shown it can attract and retain top advertisers like McDonald's, PepsiCo and Sony," he says.

One of the benefits of a being a comparatively older app in the short-video space is the trust that Snapchat has established with advertisers from a brand safety and privacy perspective, Carter suggests. Indeed, in a recent interview with Campaign, TikTok's global head of agency Lionel Sim admitted brand safety is the biggest concern advertisers have when it comes to investing in the platform—more so than the political and security risks associated with its Chinese ownership.

"What's been the biggest benefit from a Snap perspective is that the team who initially built and designed Snapchat had privacy and safety at the heart of the design from day one. So we've been fortunate to build a community and to build a platform across the last nine years which has remained true to that," Carter says.