Following ad business overhaul, Snap will ramp up investments in AI and machine learning

The new investments will reportedly be aimed in part at building a more dynamic and entertaining user experience, such as creating more augmented reality (AR) filters and delivering more personalized content to users.

They’ll also be geared towards creating more personalized marketing campaigns for brands advertising on Snapchat, “to ensure that we are able to show the right ad to the right person at the right time,” Patrick Harris, president of Americas at Snap, tells The Drum. “We are investing with a goal to target advertising in a privacy-safe and efficient way, while driving better performance for our partners.”

Harris says that Snap will invest between $0.83 and $0.85 per daily active user per quarter on total infrastructure, including AI and ML capabilities, through the remainder of 2024. That comes out to more than $1.6bn between Q2 and the end of Q4.

News of the investment follows a years-long process within Snap aimed at overhauling its ad business. The process was catalyzed in 2022 by a variety of pressues on the broader tech and marketing industries, including pandemic-fueled economic pressures and changes to Apple’s privacy policies that disrupted user-level tracking on mobile devices.

During that time, “Snapchat has largely focused on improving its lower-funnel ad offerings and measurement capabilities for advertisers,” according to Minda Smiley, a senior analyst specializing in social media at market research firm eMarketer.

The shift has cost Snap both time and money, but it’s beginning to bear fruit.

The number of small and medium brands that are advertising on Snapchat has shot up 85% year-over-year, according to the brand’s latest earnings report, published last month. Snap also reported double-digit revenue growth for the first time in more than six fiscal quarters.

“Snapchat is finally seeing its advertising business rebound after a rough couple of quarters, in part thanks to the company’s focus on bolstering its direct-response ad offerings, something marketers have been receptive to,” says Smiley. “With its advertising platform under control, it’s not surprising that the company is now setting its sights on how it can further boost its AI products and investments.”

Still, as Smiley points out, “Snap is a relatively small player compared to other social media platforms in terms of ad revenue.” The firm estimates that Snapchat will earn $2.07bn in US ad revenue this year, compared with$10.42bn for TikTok and $64.63bn for Meta.

Snap has become increasingly focused on leveraging emerging tech to enable advertisers to connect with the platform’s predominantly young user base in novel ways.

Earlier this year, for example, Snapchat launched Sponsored AR Filters, a feature that allows brands to incorporate marketing content directly through user’s phone cameras and onto their screens.

The company began to focus more heavily on AI in early 2023, following the huge early success of ChatGPT. Last February, the company debuted My AI, a chatbot available through Snapchat+ – the app’s subscription-only tier – based on OpenAI’s GPT-3 large language model.

The company has been investing in AR for an even longer period. In 2016 it released Spectacles, glasses designed to superimpose virtual elements onto the real world. (Meta was, at the same time, pouring vast amounts of talent and capital into the metaverse, but has since begun to focus more on AI and wearable AR tech; its Ray Ban Smart Glasses, released in September, received a multimodal AI upgrade last month).

Unlike other big tech players that have been busily building their own proprietary AI tech (including Meta), Snap will partner with industry leaders like Amazon and Google to develop its technology, according to the Bloomberg report.

For more on the latest happenings in AI, web3 and other cutting-edge technologies, sign up for The Emerging Tech Briefing newsletter.