Snap’s Acquisition of Fit Analytics: A $124.4 Million Investment

Earlier this year, reports surfaced regarding Snap’s acquisition of Berlin-based Fit Analytics, an artificial intelligence-powered fitting technology company. This move signaled a broader initiative by Snap to expand its services within the e-commerce sector, with the aim of enhancing the online shopping experience for users.

Financial Details of the Deal

A recent 10-Q filing from Snap has revealed the financial specifics of the acquisition. The total cost amounted to $124.4 million, encompassing the acquisition of technology, intellectual property, established customer relationships, and compensation for the Fit Analytics team.

The filing also indicated that Snap invested a total of $204.5 million in acquisitions throughout 2020, though a detailed breakdown of these transactions was not provided.

Preparing for the Snap Partner Conference

This news arrives as Snap prepares for its annual Snap Partner Conference in May. Sources suggest the company intends to unveil enhanced commerce features for Snapchat during the event.

These forthcoming tools are expected to streamline the process for Snapchat users to engage with and purchase products featured within the app, whether through advertisements or organic content shared by other users.

Expanding Commerce Capabilities

Snap has been actively recruiting personnel to bolster its commerce-related endeavors. Numerous engineering, marketing, and product positions are currently advertised, all focused on developing and launching shopping experiences.

One job description specifically calls for a Product Manager to “develop and launch shopping experiences and services that make shopping fun for Snapchatters and drive results for brands.” Roles dedicated to supporting Snapchat-based e-commerce for direct-to-consumer businesses are also available.

Strategic Acquisitions Beyond Fit Analytics

In addition to Fit Analytics, Snap has made other recent acquisitions aligned with its commerce strategy.

These include Screenshop, described as “the first AI-back style lens,” capable of identifying shoppable items in images and generating a customized catalog of similar products. This functionality mirrors “shop the look” features commonly found in fashion publications.

Furthermore, Snap acquired Ariel AI, a company specializing in rapid 3D rendering of individuals. This technology has diverse applications, including gaming and virtual try-on experiences for clothing, makeup, and accessories.

Confirmation and Unconfirmed Acquisitions

Snap officially confirmed the Ariel AI acquisition to CNBC in January. While the Screenshop deal was initially reported by The Information earlier this month, Snap has not issued a public statement regarding it.

However, evidence suggests the acquisition occurred, as individuals formerly employed by Screenshop are now working at Snap.

Acquisition Timeline and Investment

Both the Fit Analytics and Screenshop acquisitions were finalized in 2020, contributing to the $204.5 million total spent on acquisitions that year. A smaller acquisition, valued at $7.6 million, was completed in the most recent quarter, though details remain undisclosed.

Early Commerce Initiatives

Snap’s exploration of commerce features dates back several years, though previous efforts have not achieved widespread adoption.

In 2018, the company launched a Snap Store, which currently focuses on selling merchandise featuring Bitmoji characters. A collaboration with Gucci in 2020 allowed Snapchat users to virtually try on shoes using augmented reality before purchasing them.

This campaign was viewed by some as a significant step towards integrating commerce into Snapchat, but it did not evolve into a sustained initiative.

The Potential of E-commerce and Augmented Reality

The surge in online shopping driven by the pandemic, coupled with advancements in technology, may create a favorable environment for Snap’s commerce ambitions.

Diversifying Snapchat’s revenue streams through integrated commerce experiences is a logical strategy. This approach provides an additional income source, particularly in light of potential changes to advertising monetization practices introduced by Apple.

Snap’s average revenue per user currently stands at $2.74, a figure investors will be keen to see increase.

Leveraging Snapchat’s Strengths

This strategy aligns with Snapchat’s target demographic, as younger consumers increasingly utilize social media platforms for product discovery, sharing, and purchasing. Furthermore, it capitalizes on Snapchat’s core competencies in augmented reality, image manipulation, and visual technology.

Snap positions itself as a “camera company,” and building shopping experiences that leverage these capabilities represents a natural extension of its brand identity.