Brief:

• Verizon will preload image-messaging app Snapchat on some of its 5G smartphones as part of an "official 5G innovation" alliance, the companies announced. Snapchat parent company Snap's part of the deal involves developing new augmented reality (AR) features at Verizon's 5G Labs, which focuses on applications for the next generation of high-speed wireless service.
• The AR innovation will include Snap's Landmarker technology for geotargeted entertainment and Portal Lenses that can virtually transport mobile users into other settings, such as backstage at concerts. The Portal Lenses also can provide in-stadium AR experiences to fans attending sports events.
• Verizon will have premium sponsorship placements in Snap Originals, the episodic video series that run in the app's Discover tab. The technology company also will provide exclusive offers to Snapchat users through its Verizon Up rewards program, per the announcement.

Insight:

Verizon and Snap's innovation alliance appears to be a win-win for both companies as higher-speed 5G mobile service slowly expands nationwide. Preinstalling Snapchat on Verizon's 5G phones not only saves users the trouble of downloading the app, but it also opens the possibility for Snap to expand its user base to new customers who may not be familiar with the app or go out of their way to download it. Snapchat is used by 90% of Americans ages 13 to 24, and by 75% people ages 13 to 34, giving Snap more room to expand and allowing Verizon to reach these young, coveted consumers.

Snap also gains access to more technological resources that Verizon can provide as the second-biggest wireless carrier in the U.S. with 118.7 million subscribers. Snap has made AR experiences a key part of its core app for several years, and has ambitious plans to integrate the technology with hardware like its Spectacles wearable. The device failed to gain traction as a wearable camera with a wireless connection to smartphones, but its future evolution into an AR headset could be a game-changer for Snap as it expands its offerings beyond the original image messaging. AR headsets that let wearers see a digital feed of images and information as they move around the real world may one day replace smartphones for some consumers. Apple, Facebook, Google, Microsoft and Sony are among the tech companies that already sell AR headsets or have indicated interest in the burgeoning market through acquisitions and investments.

Verizon stands to benefit from the alliance with Snap by extending its branding among Snapchat's audience of tech-savvy young adults. Verizon already has a major content platform with Verizon Media, whose brands include Yahoo, AOL, Engadget and HuffPost. The alliance opens up the possibility of further collaboration among Verizon's suite of brands in developing content that differentiates their respective platforms from competitors.

Snapchat's efforts to expand its audience and appeal to more advertisers led eMarketer this week to raise its forecasts for the image-messaging app and parent company Snap. The researcher now expects Snapchat's user base to grow 14% to 293 million worldwide by the end of 2019, up from a prior estimate of 281.3 million. By the end of 2023, eMarketer predicts Snapchat will add more than 63 million users, 11 million higher than previous estimates.