Here’s why augmented reality will be key to Snap’s future Spectacle success (SNAP)

Tech company Snap announced a redesigned version of its Snapchat Spectacles yesterday. Spectacles are connected sunglasses that enable users to capture small snippets of video and post them to Snapchat without having to use a phone.

The new Spectacles 3 glasses boast an important first: dual HD cameras to capture snaps in 3D and the ability to transform them with AR effects, new lighting and landscapes, and other effects after uploading to Snapchat. Priced at $380 — more than double its predecessor — the glasses will begin shipping in fall 2019.

Although the first and second iterations of Spectacles saw lackluster uptake, Spectacles and AR will play an increasingly important role for Snap over the next 10 years, per CEO Evan Spiegel.

Snap has established itself as a leader in AR-filter capabilities with Snapchat, but has failed to generate significant interest in its hardware so far — it reported a $40 million loss on Spectacles’ first version, for instance. Nevertheless, Snap is likely pushing forward with Spectacles for two key reasons:

To eventually capture a large slice of the untapped AR-wearables market. Business Insider Intelligence expects shipments of consumer AR headsets to reach 2.5 million units in 2024. Since Snap’s first wearables foray in 2016, it’s been expected its glasses would ultimately integrate AR. This has now come to fruition: Spectacles 3 are the first to enable users to add AR filters onto snaps, which means the effects appear as if they’re in the real world. And the introduction of depth perception is a game changer, according to Spiegel, per Vogue; it makes it easier for software to differentiate objects in images, enabling greater interactivity with images and videos. While Snap has positioned Spectacles 3 as a limited release, it’s likely a test for more advanced AR computing before releasing hardware with similar capabilities at a more palatable price point, which should provide a more compelling use case for the glasses.
To keep up with competition in the AR industry. Almost all of the major tech companies — including Facebook, Apple, and Google — are developing immersive eyewear. Snap’s early work in getting consumers accustomed to wearing a camera on their heads, even if they may not be fully receptive right now, could be a big part of its plans to lead the next wave of consumer-worn devices. Just last week, Snap pledged to raise $1.1 billion in debt to fund investments in AR and possible acquisitions. And continued progress in AR is especially important for Snapchat’s future growth — 54% to 69% of new Snapchat user signups in Q2 were attributable to new AR lenses — meaning being able to beat other tech giants to market with its next-generation glasses could translate into boosted Snapchat signups over the long term.

However, if Snap hopes to see the success that eluded its previous versions of Spectacles, the firm will have to incentivize Snapchat users to adopt the new product. One way this could be accomplished is by promoting the hardware among the app’s power users, or even giving those users early access, enabling them to showcase unique content and experiences to their friends on the app.

This could have a domino effect on followers, and attract more Snapchatters to adopt Spectacles. If the hardware starts to gain adoption thanks to a "patient-zero" group of users, Snap could ultimately offer a lower price point to ensure the hardware is attainable for the bulk of its core audience — Snapchat now reaches 90% of 13- to 24-year-olds in the US, UK, France, Canada, and Australia, according to Spiegel.