Is There A Qualitative Moat?

After some recent research and anecdotal experience, here are some moats I've identified.

>Networking Effect

A short anecdote from my youth (I am 25 right now). When I was in Middle School, back around 2011-2013, all of the most popular kids at school used Snapchat obsessively. Being more of a Dungeons and Dragons geek, I kinda tilted away from these individuals generally-speaking, but if I was part of their cliques, I certainly would have been on Snapchat (its original name was Picaboo) much earlier as well! Fast-forward to present day, and my siblings of younger generations, one 10 years my junior, are still using Snapchat more than ever, keeping up streaks with friends, and just loving the easy and fast (snappy, if you will) user-interface. I asked my sister why she was using Snapchat to record a normal video (instead of the camera app), and she said it was “just better.” Additionally, I know people older than me, especially moms, in their 30’s, 40’s and 50’s that are on the platform to tell their stories and stay connected. The app is very approachable by all ages.

On the topic of my middle school days, those kids that were on Snapchat back then, likely have it still installed on their phones to this day. Being in my mid 20s at 25 years old, I know we are in our prime-spending years; the time when you’ve left the nest and need to build your own space for once, especially once you get a job after school. Some spending-power can actually be attributed to the younger users as well actually, given the leverage they have over their parents, especially in a stronger broad economy.

I’ve seen cycles come and go for social media applications, but Snapchat has remained in the background, always installed, and constantly letting you know if a friend has hopped into your chat or sent you a message. It is one of the few social media apps that I have notifications turned on for, as most of my family always seem to find some time to enjoy it.

By using Snapchat over a regular camera, you’ll feel like you are creating more than just a picture, it adds substance, life, and laughs to many that might otherwise struggle to look in the mirror. Snapchat is the closest thing we have to digital polaroids, and the memories it creates are timeless and sweet.

>Innovation Moat

Moving on from its widespread adoption, we should also consider the power they wield with their augmented-reality lenses, which are seemingly their bread and butter. They use a unique and proprietary interactive medium, known as a “Lens.” These Lenses have some very intriguing qualities that allow the advertiser to very subtly manipulate the facial expression of the user being delivered the advertisement. This has almost a dystopian feeling that comes along with it, in the sense that it certainly feel like a more openly aggressive tactic (compared to simpler algorithmic and AI-optimized advertising by competitors like Google and Meta Platforms).

They also provide creators a powerful yet approachable platform, Lens Studio. This game engine -like tool gives 3D artists, graphics engineers, game developers, and anyone willing, really, a familiar tool that makes creating those mission-critical lenses simple and affordable for Snap Inc. Everybody wins! Because Lens creators are rewarded for using Lens Studio effectively through revenue sharing, users get ample choice of fun new Lenses, and Snapchats ecosystem is given new life with every feature they implement in their Lens creation toolset. Essentially, the updates they make to Lens Studio has a multiplying effect in terms of making Lenses easier to create, they effectively crowdsource their community and advertisers to build compelling Lenses, and their user-base reaps all the benefits of this prosperous cycle.

Additionally, Snap Inc. provides consulting services to advertisers and grant programs to creators with their Snap Lens Network and Ghost programs (page 7 of Snap Inc. 2023 Annual Report) which can likely provide very deep ties and intimate relationships between them and their greatest clients.

>Secrets Moat

Despite being a software company, Snap Inc. owns the rights to approximately 3174 issued patents and has filed 3111 new patent applications (as of December 31st, 2023 on page 11 of the Snap Inc. 2023 Annual Report).