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SNAP, Microsoft Advertising to Power Sponsored Links in My AI

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Snap Inc. (SNAP - Free Report) has announced a partnership with Microsoft (MSFT - Free Report) Advertising to power Sponsored Links within the artificial intelligence (AI)-powered chatbot, My AI, which was rolled out by Snap to its vast global community of more than 750 million monthly Snapchatters.

This partnership leverages Microsoft Advertising's Ads for Chat API to enable the seamless delivery of relevant links during conversations. This collaboration is expected to help partners reach Snapchatters when they have expressed potential interest in their offerings.

My AI has quickly become one of the most popular consumer chatbots available, with millions of users turning to it for real-world recommendations and information about their interests. It covers a wide range of topics, including food & dining, beauty & fitness, shopping & gadgets and more.

Snap recently started testing Sponsored Links within My AI. This feature aims to surface relevant content and experiences to Snapchatters from selected partners. It represents a new way for brands to connect with Snapchatters and provide tailored content during conversations.

Microsoft Advertising's clients in the United States and selected markets can now engage with Snapchatters through My AI, delivering links that are contextually relevant to ongoing conversations.

This partnership and the continued development of My AI demonstrate Snap's dedication to enhancing user experiences, offering personalized content and creating advertising opportunities for brands within its platform. It will be interesting to see how this collaboration evolves and what other features and enhancements are in store for My AI in the future.

Snap Inc. Price and Consensus


Snap Inc. Price and Consensus

Snap Inc. price-consensus-chart | Snap Inc. Quote

Snap’s AI Initiatives to Aid Declining Ad Revenues

Snap and other competitors, including Alphabet (GOOGL - Free Report) , have been facing challenges in its advertising revenues due to fierce competition from platforms like TikTok and Meta Platforms’ (META - Free Report) Instagram, as well as changes in Apple's app privacy policies.

META is pumping resources into developing generative AI on its platform. Last month, the company announced that it is making its AI large language model, Llama 2, which will be available for commercial use through partnerships with major cloud providers, including Microsoft.

With this expanded partnership, MSFT and Meta are supporting an open approach to provide increased access to foundational AI technologies to benefit businesses globally. Investments in AI are also expected to draw higher revenues from Meta’s ad business.

In its race to target TV ad dollars, Alphabet allowed third-party (Nielsen and comScore) tagging of YouTube videos to determine the effectiveness of ads on YouTube versus ads shown on TV.

Snap is suffering from declining ad revenues as advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressure and the rising costs of capital. In many high-growth sectors, businesses are reassessing investment levels amid the rising cost of capital, which led to cutbacks in spending on advertising. The persistent decline in the price-per-ad impression is likely to dent advertising revenues for the company in the near term.

To address this and maintain user engagement, Snapchat introduced new AI features, some of which are exclusive to its paid subscribers. One of these features is My AI, which was launched in April. My AI has garnered significant user engagement, with over 150 million people sending more than 10 billion messages to My AI.

Snap's premium service, Snapchat+, costing users $3.99 per month, serves as a platform for offering exclusive, experimental and pre-release features, and it has amassed more than 4 million paid subscribers.

Last quarter, the company introduced several features, including First Story, Ads in Spotlight and Snap Star Collab Studio among others, making it easier for advertisers to get in front of Snapchat’s unique audience, work with creators and activate with content partners.

First Story enables advertisers to reserve the first video ad between Friend Stories that a Snapchatter sees, and in the United States, it offers a potential daily reach of nearly 50 million. The Collab Studio will accelerate partnerships between brands and Snap Stars through managed service production, which is supported by four initial partners, including Studio71, Beeline by Brat TV, Influential and Whalar. Experienced teams will help brands create and execute sponsored Stories and bespoke ad creative with Snap Stars.

Snapchat is also creating a feature called Dreams with Friends, allowing users to grant their friends the ability to create AI dream images that include both individuals. This new feature is expected to boost the Daily Active Users (DAUs) in the upcoming quarter.

The Zacks Consensus Estimate for SNAP’s 2023 DAUs globally is pegged at 412.85 million, indicating year-over-year growth of 121.9%. The Zacks Consensus Estimate for revenues is pegged at $4.5 billion, indicating a year-over-year decline of 2.16%.

Shares of this Zacks Rank #3 (Hold) company have declined 3.6% in the year-to-date period against the Zacks Computer and Technology sector’s rise of 34.7%. SNAP’s recent AI efforts are expected to boost its top line in the upcoming quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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