Snap Inc., the parent company of popular social media platform Snapchat, has unveiled its latest innovation in consumer hardware - the fifth generation of its Spectacles augmented reality (AR) glasses. The new Spectacles have the ability to overlay digital graphics onto the physical world, offering developers the opportunity to create engaging AR applications. However, as Snap ventures further into hardware, the company faces challenges due to its struggling core online advertising business.

The fifth generation of Spectacles is currently available exclusively for developers who are willing to commit to a monthly payment of $99 for a year. With enhanced software and a redesigned operating system called Snap OS, these glasses are capable of delivering more immersive digital visuals compared to their predecessors. Snap has also partnered with OpenAI, the creator of ChatGPT, to empower developers with tools to incorporate artificial intelligence features into their AR applications for the smart glasses.

This announcement from Snap comes just days before Meta's Connect event, where the parent company of Facebook typically unveils its latest hardware offerings. Both Snap and Meta have been striving to break into the consumer hardware market for years. However, unlike Meta, Snap has been grappling with challenges in its online advertising business. In August, Snap's shares fell over 20% after reporting weaker-than-expected guidance for the third quarter and falling short of analysts' revenue expectations for the second quarter.

While Meta's advertising business continues to thrive, its hardware efforts, including its Reality Labs unit responsible for VR devices and smart glasses, have resulted in significant losses. Meta has invested over $63 billion in expenses for its hardware endeavors since 2020. Despite this, Wall Street has remained patient due to the success of Meta's advertising business. In 2023, Meta generated a staggering $131.9 billion in advertising sales with a net income of $39.1 billion. In contrast, Snap recorded $4.6 billion in total revenue but incurred a net loss of $1.3 billion in the same year.

Leo Gebbie, a principal analyst and director at CCS Insight, highlights the disparity in scale between Snap and Meta, stating that "Snap is just functioning at a different scale than Meta." Gebbie suggests that for Snap to compete effectively, its AR device needs to be impressive, combining the best features of the highly popular Snapchat app while appealing to its younger demographic.

Snap's journey in hardware began in 2016 with the launch of the initial Spectacles glasses, designed to capture first-person videos for sharing on Snapchat. However, the company faced challenges in selling the $130 devices and incurred losses of nearly $40 million. Subsequently, Snap introduced other versions of Spectacles, including an AR-capable model sold in limited quantities to developers in 2021.

In a strategic move reminiscent of Meta's approach, Snap has revealed its latest AR glasses ahead of Meta's anticipated hardware unveilings. Snap CEO Evan Spiegel has focused the company's hardware efforts on camera technology, believing it to be a natural complement to Snapchat and its massive user base of 850 million monthly active users.

As Snap pushes forward with its hardware ambitions, the question remains as to how long investors will be patient with the company's hardware aspirations. With mounting losses in Meta's Reality Labs, investors have exhibited tolerance due to Meta's profitability in the advertising sector. However, Snap finds itself in a more constrained position and facing considerable challenges in establishing a foothold in the hardware market.

While the path ahead may be challenging for Snap, its commitment to innovation and improvements in AR technology may offer a glimmer of hope for the company's hardware endeavors. As the competition between Snap and Meta intensifies, industry observers eagerly await the next chapter in the race for dominance in the augmented reality space.

[WATCH] CNBC's Jim Cramer shares insights on Snap and the current market landscape.