Snapchat’s Spiegel turns focus to AI after reviving its advertising business

Snap Inc. CEO Evan Spiegel said he is investing more heavily in bringing artificial intelligence and machine learning to Snapchat to make the app more interesting for users, a change next big after years spent revamping its advertising business.

“There is an acknowledgment that we have fallen behind in terms of machine learning, which, to some extent, is reflected in business performance,” Spiegel said in an interview. “We needed to get better at that and bring together some of our most senior machine learning experts to talk about what it would look like for us to get to the state of the art and really invest.”

Being able to spend more time on exciting innovations — like making content on the Snapchat app more personalized or building artificial reality software and filters — is a hard-won achievement. for Spiegel. His company is grappling with huge changes in how people use social media apps and what kind of digital ads marketers want to buy on them. He has spent much of his time over the past few years overseeing the overhaul of Snapchat’s monetized ad business, making big changes that are finally showing signs that they are working. fruit.

In 2021, the Snapchat experience revolves around messaging and Stories from friends, as well as camera filters that spice up posts. For advertisers, it’s all about telling stories that evoke brand emotions rather than advocating for immediate purchases. Snap needed to evolve its app for both of these important groups, a shift that required new technology, expensive infrastructure, and a reshaped organization.

Now, the company is pouring money into building machine learning, AI and augmented reality features to support Snap’s user feed and advertising business. Instead of building it all in-house like peers at Alphabet Inc. or Meta Platforms Inc., Snap is collaborating with major technology partners such as Amazon.com Inc. and Alphabet’s Google for a cloud partnership, giving the company more time to work on product innovations and new products. Experience Snapchat.

However, Snap expects to continue investing about 84 cents per daily user per quarter going forward on infrastructure alone. According to Bloomberg calculations, this equates to about $1.5 billion per year, just over half of the estimated annual operating costs.

Direct advertising

It’s an investment strategy made possible by the necessary but self-inflicted effort of revamping the company’s advertising business. Snap has shifted from focusing on brand advertising to expanding into direct response campaigns that drive immediate purchases or app downloads – ads that are technically more difficult to build but just as productive. much more beneficial.

The overhaul came at a cost. Snap’s shares have fallen more than 70% since the height of the pandemic, but the company has made the improvements Spiegel promised. After posting revenue declines in the first two quarters of 2023, Snap’s new ad offerings are starting to take off. Snap is back to double-digit growth, and analysts expect it to be its best revenue year ever. After last month’s positive earnings report, shares are up more than 71% from a year ago.

“We’re just trying to be very realistic about the operating environment, but then really have faith in our team and our capabilities,” Spiegel said from the stage at the Bloomberg Technology Summit earlier this month. ability to carry it out”. “That allows us to maintain positivity which I think is very important during such a tumultuous time.”

Analysts are also paying attention.

“Years of hard work is starting to pay off for Snap’s advertising business,” Max Willens, senior analyst at Emarketer, said after the latest earnings report. “Snap seems to be developing credibility as a platform that can deliver.”

Rebuild

With advertising revenue rebounding, Snapchat plans to expand its content offerings and augmented reality experiences – areas where Spiegel plans to devote more personal time. It also drives new product experiences. Snap is hoping to improve its recommendation algorithm for its Stories and short-form video feature Spotlight, competing with TikTok. Snapchat’s next big step is to combine those two products together. “I think that will really benefit how people discover our content on our service, so that’s a big priority,” Spiegel said.

Having to play catch-up is a unique position for Spiegel, who has earned a reputation for being ahead of the competition when it comes to identifying trends in the social media industry. Some cases yield positive results — such as Stories and facial filters or AI chatbots in apps and successful social subscription services.

Other trends that Spiegel discovered were more difficult to accept. He warned early on about a decline in marketing spending after the pandemic and was one of the first to begin deep layoffs and other cost-cutting measures at Snap, killing projects aimed at refocusing Focus business activities on fewer priorities.

When it comes to the future of computing, Snap hopes that Spiegel’s product instincts will pay off again. The CEO initially put his stake in augmented reality, while the company’s main competitor, Meta, invested in virtual reality. Where Snap was making glasses and filters that could change the world around you when captured on camera, Meta was working on headsets that were bulky and transported users into virtual worlds. Meta has been spending more time and resources on smart glasses and recently launched camera-equipped Ray-Ban sunglasses — much like Snap’s camera glasses, called Spectacles, launched in 2016. .

Snap hasn’t released a new pair of its own glasses in over three years, but they’re still building and developing the technology behind the scenes. Users have seen the work in Snapchat, such as in an eerily realistic filter showing what you’d look like with a 1990s style or filters that work live at LA Rams football games and change fans’ faces on the jumbotron.

For Spiegel, augmented reality is promising because it can “be integrated in the world and shared together,” he said. “A lot of the things we focus on are things that aren’t possible with today’s technology. So whether it’s a VR headset or a computer or a phone, I think people feel really isolated by the technology products that they use today. We are looking to a future where people will play, learn and work together in the same physical shared environment but powered by augmented reality.”

It’s similar to how the company views Snapchat’s user base, which primarily uses the app for messaging but can also post or scroll through content. “What we noticed was that people kept coming back to the ceremony to talk to their close friends and family,” Spiegel said. “Where we see churn, it’s often when we’re not able to connect people to the people who matter most to them.”

This article was generated from an automated news agency feed without modifications to the text.