Brands Discover Snap Ads Are Clicking With Users

In June, Snapchat CEO Evan Spiegel said the company’s adoption of artificial intelligence (AI) could give their advertising strategy a major boost.

At the time, Spiegel discussed the advancements of the social media platform’s My AI chatbot, mentioning that roughly 150 million users have engaged with the chatbot since its introduction earlier this year. They have collectively exchanged over 10 billion messages, with 5 million of them revolving around McDonald’s and “tens of millions” of conversations focusing on cars and recommendations regarding car purchases.

The news came as Snapchat saw brands reducing their ad spending on its platform.

The company’s quarterly earnings report in April reflected the impact of these pullbacks. Snapchat had reported its first-ever decline in quarterly revenue, a 7% drop to $988.6 million for the first quarter of 2023, as opposed to the $1 billion it had earned during the same period the previous year.

Today, Snap is sharing a completely different story.

In Snap’s latest quarterly earnings update, which dropped on Tuesday (Oct. 24), the company highlighted a comeback in its sales game, as revenue surged by 5%, compared to the previous year’s $1.13 billion, signaling a strong performance.

Within Snap’s “internal forecast,” the company foresees fourth-quarter sales ranging from $1.32 billion to $1.38 billion, a subtle variation from the $1.33 billion estimated by analysts.

Snap made it clear that it’s abstaining from issuing official guidance for the fourth quarter, attributing this decision to the unpredictable global events.

The company noted that it has witnessed a slowdown in spending from a substantial portion of predominantly brand-focused advertising campaigns right after the onset of the Middle East conflict. This slowdown is impacting the current quarter’s sales.

Why Brands are Returning to Snapchat

Snapchat said it seeks to foster an environment where personal connections thrive.

With that in mind, and with more engagement on the app, Snapchat users find that their ad experiences are more personalized and ultimately relevant.

According to Snap, “Compared to other apps that tend to be more entertainment focused, Snapchat is a more intentional platform.”

What that means, according to the social media platform, is that when Snapchat users encounter content that resonates with them personally, their engagement levels increase. Solidifying that sentiment are Snapchat findings that state that neuro engagement scores were 62% higher than those on Facebook and 32% higher than TikTok.

Snap by the Numbers

In its Q3 financial report, Snap demonstrated a 5% year-over-year increase in revenue, reaching a total of $1,189 million. The company also experienced growth in its daily active users, with a 12% year-over-year increase, bringing the count to 406 million.

However, Snap also reported a net loss of $368 million, compared to the previous year’s figure of $360 million. An interesting turn was the company’s positive adjusted EBITDA, which stood at $40 million.

Over the trailing twelve months, Snap’s operating cash flow amounted to $207 million, with free cash flow reaching $2 million. This financial performance highlights Snap’s growth and efforts to bolster its user base.