Social media company Snap (SNAP) has big international expansion plans for 2022 after recently hitting a milestone of 100 million monthly users in India. Snap operates the photo-sharing app Snapchat, which competes with the likes of Meta Platforms’ (FB) Facebook, Instagram, and TikTok. Snap stock declined 8.20% on Friday to close at $32.12.
Snap has revealed to Reuters its plan to expand its international growth. In addition to deepening its presence in India, the company plans to accelerate its growth in Mexico, Brazil, Japan, Indonesia, Spain, and Italy. To do that, the company intends to partner with telecom operators and smartphone manufacturers to preinstall Snapchat.
It is also considering joint marketing efforts with wireless operators and zero-rating plans that allow subscribers to use the app without consuming their mobile data. Facebook similarly used the zero-rating strategy to fuel its international expansion in markets where data was expensive.
Improved Android App Driving International Growth
In 2019, Snap rebuilt its Android app to improve its usability for international users, who use Android more widely than iPhone. Following the improvement of the Android app, the majority of Snapchat users are now on Android devices. The improved Android app is credited with fueling Snapchat’s rapid growth in India, which, in turn, inspired the international expansion drive.
“We’ve seen the fruits of that play out as Android is really driving our growth,” Nana Murugesan, head of Snap’s international markets, told Reuters.
To support its international expansion efforts, Snap plans to open new offices in Tokyo, Madrid, and Milan, later this year. Other plans include the rolling out of more augmented reality features, adding more local media content to Snapchat’s Discover section, and hosting workshops to promote the app to high school and college students.
AR technology is particularly a top priority for Snap in Japan. The country has a robust community of AR developers and Snap would seek to tap that to attract users. For example, Snap is discussing partnering with a Japanese animation studio to build AR lenses, a feature that enables Snapchat users to overlay their photos with funny images.
Snap makes money from selling ads on Snapchat. It still generates most of its revenue in North America, but the expansion is expected to help Snap grow its international revenue as some of the countries targeted are among the world’s top online advertising markets. An advantage that Snap enjoys over many of its competitors is that it has mostly avoided the backlash over toxic content. The company vets the posts that people share publicly on Snapchat.
Analysts’ Take
Morgan Stanley analyst Brian Nowak recently maintained a Buy rating on Snap stock but lowered the price target to $60 from $65. Nowak’s reduced price target still suggests 86.80% upside potential.
Consensus among analysts is a Moderate Buy based on 11 Buys and 4 Holds. The average Snap price target of $65.36 implies 103.49% upside potential to current levels.
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