Snapchat Plays Defense Against Apple’s New Memoji

As it turns out, Snap (NYSE: SNAP) was on to something when it acquired Bitstrips, the maker of Bitmoji personalized avatars, in March 2016. When Snap went public last year, it disclosed in its prospectus that it paid approximately $64.2 million for the Toronto-based developer, which consisted of $46.6 million in cash and $11.6 million in stock in addition to assuming $6 million in accrued expenses and other liabilities. That was much less than the $100 million price tag that was reported at the time.

With Apple (NASDAQ: AAPL) recently announcing Memoji, an animated personalized emoji that users can control with their faces, Snap is rightly scared.

12 examples of customizable Memoji

Playing defense

Snap is opening up Bitmoji just a little bit more, allowing users to use Friendmojis outside of the core Snapchat app in iOS, according to Engadget. Friendmojis are the Bitmoji stickers that include both the user and a friend. Standalone Bitmoji have long been available as stickers within iOS. The company will require users to link their Snapchat accounts with Bitmoji in order to utilize the new feature.

It’s a minor change, which also could be related to the fact that more direct rival Facebook is reportedly working on its own personalized avatars for users, which would be the latest in a slew of features that the social juggernaut has copied from Snap. Incidentally, Bitstrips actually started out on Facebook, allowing users to create customized comic strips.

Snap now finds itself playing defense against two tech giants.

Goodwill hunting

Apple’s angle is pretty obvious: Sell more iPhones by including a social feature that is becoming increasingly popular, particularly in messaging, which itself has huge platform potential.

The risk to Snap is less conspicuous. Bitmoji’s revenue model is through sponsored partnerships, customized bitmoji that feature certain brand advertisers like McDonald’s, which announced the first such deal in December. Bitmoji is free to regular users and does not offer in-app purchases. Snap is also leveraging the underlying technology to create 3D bitmoji in augmented reality (AR) on Snapchat — which Apple is also replicating with Memoji.

It’s also worth remembering that Snap recorded $52.7 million in goodwill on its balance sheet from the Bitstrips acquisition, comprising the vast majority of its purchase consideration. If Bitstrips’ potential to bolster Snap’s business falls short, it may have to impair that goodwill, eating a painful impairment charge in the process.

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