Brief:

• Snap plans to launch a gaming platform in its Snapchat image-messaging app next month, Cheddar reported, citing an unnamed source. The service, code-named "Project Cognac," will include games from third-party developers that work inside Snapchat, which has 186 million users worldwide.
• Snap will unveil the gaming service at its first-ever developers conference in Los Angeles on April 4. The conference will feature gaming and video content including original programming. An invitation to the event has the tagline "Less talk. More play," per Cheddar.
• Aside from content, Snap is focused on "scalable ROI for advertisers of all sizes," Jeff Miller, global head of creative strategy, said to Digiday at the SXSW conference last week. He said Snapchat can deliver a cost per completed view of 2 cents for six-second, unskippable ads.

Insight:

Social media companies like Snap are in a race to keep mobile users engaged with their apps, and that means developing gaming platforms to appeal to the 50% of mobile users who said they opened a gaming app in the prior week, per a survey by researcher Newzoo. Videogames like "Fortnite" from Epic Games have a significant social component that urges players to gather online, chat with each other and watch other gamers instead of isolating themselves with an Atari console in the family room, as older generations experienced.

"Fortnite," a battle royale game that can be played on every kind of device, acts like a social network for the teenage boys who make up a significant part of its audience, The Wall Street Journal reported. But "Fortnite" recently saw a 31% drop in social-media mentions from a year earlier, per social media analytics firm Talkwalker, as players have been fatigued with the game and other companies like Electronic Arts moved into the battle royale market. Snap has an opportunity to reach gamers who are continually looking for games to play with friends on mobile devices.

Snap needs to have a gaming platform to keep pace with rivals like Facebook and Google. Facebook last week added a gaming tab to its platform in a limited release, and plans to roll it out to more users in the coming weeks, per VentureBeat. The gaming tab follows a redesigned navigation bar in its mobile app that helps users get personalized shortcuts to their favorite features. Google has been hinting at its "vision for the future of gaming" in the lead-up to a keynote presentation at its developers conference May 7-9. The search giant last week rolled out smart segmentation features in Google AdMob that use machine learning to categorize players based on their likelihood of making in-app purchases, according to a company blog post.

Snap and Epic Games received significant investments from Chinese gaming giant Tencent. The company last year said it may collaborate with Snap on games, which would help the company to extend its reach amid stricter rules on game approvals in China's highly regulated video game market. Snap's quarterly loss fell 45% to $191.7 million in Q4 2018 from $350 million a year earlier as the company took steps to monetize its shrinking user base. Gaming may help the company to maintain sales growth. Revenue surged 36% from a year earlier to $389.8 million on strong gains in digital advertising, the company reported.

Mobile gamers are much more receptive to advertising, with 53% of gamers saying ads helped them get updates about products they want, compared to 42% of non-gamers, Newzoo's survey found. Almost half (43%) of gamers said they're more likely to buy or use brands that have ads they like, compared to 32% for non-gamers. That receptiveness to advertising may support Snapchat's appeal to mobile marketers.