Friday, September 28, 2018

Amazon-Snapchat Partnership Expected to Substantially Impact Snap Inc.'s Future Business Prospects

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Online commerce constitutes a huge portion of all merchandise being purchased, and each year, the proportions keep increasing. While some people prefer to go into a store to actually feel an item or try on some clothes before making their purchase, services like Amazon Prime make it easy and convenient for consumers to shop online, then return anything they don't like, free of charge. With a feature that was recently added to Amazon's app, which allows a user to take a picture of an item in the real world in order to search for it on Amazon, the online market will continue to grow exponentially. Interestingly, although Amazon already has this feature on their own app, according to Sam Dean's L.A. Times article, the corporation has recently partnered with Snapchat to give the social media app the same shopping capabilities.

Economic analysts are unsure as to what Amazon's end goal might be. The corporation already has an app capable of leading a user to an item for sale based on a captured image. Why does Amazon want to add the same feature to Snapchat's app? Similarly, what could Snapchat possibly be getting out of the deal that it makes it worthwhile for them to use their platform to help an indirect competitor like Amazon? The explanation for Snap Inc.'s end of the partnership is simple: money. Online platforms that push business in Amazon's direction get between 1% and 10% of the sale price of a purchased item as a commission. So, the more Snap customers purchase on Amazon (which can be improved with this image-recognition feature), the more money Snap Inc. can bring in.

For Amazon's side of this partnership, no definite conclusions have been drawn. Some believe that Snapchat has a user base that is significantly different from Amazon's, to the extent that the benefit of increased sales would far outweigh the cost of adding the feature to Snapchat's app. According to a study, over three-quarters of all internet users between the ages of 18 and 24 use Snapchat, and that demographic tends to be much more likely than the average consumer to make online purchases on a whim. Others believe that this partnership is part of a far larger plan on Amazon's part. History has shown that when Amazon partners with a smaller company, they tend to only play nice until they fully understand the company's business model, at which point they put them out of business.

Alternatively, this tentative partnership could be a plan on both sides to improve the odds of a peaceful transition of ownership in the near future. Snap Inc. recently hired Tim Stone (a long-lasting executive at Amazon) as Snap's Chief Financial Officer. Also, because of Facebook's blatant copying of Snap's intellectual property over the years, if Snap executives were ever to consider liquidating the company, they would likely strongly oppose selling to Facebook, their business enemy. So, it isn't unbelievable to think that Snap might be gearing up to sell to Amazon soon, and this update to Snapchat's features could be their first step in testing such a combination of the companies.

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