Snapchat focuses on AI with $1.5 billion yearly investment
What's the story
Snap Inc.'s CEO, Evan Spiegel, has revealed plans to significantly increase investment in artificial intelligence (AI) and machine learning for Snapchat.
This decision marks a major shift following years of restructuring the company's advertising business.
"There was a recognition that we'd fallen behind the curve on the machine learning side," Spiegel said during an interview, highlighting the need for improvement and collaboration among senior machine learning experts.
Business overhaul
Spiegel's focus on AI follows successful ad business revamp
Spiegel's new focus on AI and machine learning comes after years of successfully overhauling Snapchat's advertising model.
The CEO dedicated significant time to making substantial changes to the platform's advertising approach, which are now yielding positive results.
In 2021, Snapchat was primarily centered around messaging, Stories from friends, and camera filters that enhanced posts for users while allowing advertisers to narrate brand stories that stirred emotions rather than pushing for immediate purchases.
Strategic partnerships
Snap partners with tech giants for AI development
Unlike Google parent Alphabet or Meta Platforms., who develop everything in-house, Snap is collaborating with tech giants like Amazon and Google for cloud partnerships.
This strategy allows the company to concentrate on product innovations and new Snapchat experiences.
However, this investment comes at a significant cost, with plans to continue investing about 84 cents per daily user each quarter on infrastructure alone, amounting to roughly $1.5 billion a year.
Lucrative transition
Snap's shift to direct response campaigns proves profitable
Snap's transition from focusing on brand advertising to expanding into direct response campaigns has proven challenging yet financially rewarding.
These campaigns, which prompt immediate purchases or app downloads, are technically more complex to build.
Despite the company's stock falling more than 70% since its pandemic highs, Snap has made the improvements that Spiegel promised, with new ad offerings gaining traction and analysts predicting its best sales year ever.
Future plans
Snapchat plans to expand content and AR experiences
With ad revenue growing again, Snapchat plans to broaden its content offerings and augmented reality experiences - areas where Spiegel intends to spend more time personally.
The company aims to enhance its recommendation algorithms for Stories and its short-form video feature, Spotlight, which competes with TikTok.
"I think that's going to be really beneficial to the way that people discover our content on our service, so that's a big priority," Spiegel stated.