Snap Boosts Digital Ad Platform to Compete with Meta, TikTok

Snap wants to know what makes you head to the checkout. 

The company is seeking to patent a system for “predicting a conversion rate” for advertisements. To put it simply, Snap’s tech uses machine learning to determine the likelihood that users will be hooked by different digital ads. 

“Selecting advertisements to be transmitted to such a wide variety of devices at various locations can be difficult,” Snap said in the filing. 

Snap’s machine learning model evaluates the bids of different advertisers to choose which one will be most effective based on the predicted conversion rate. The model takes into consideration factors such as typical user behavior and historical conversion rates for similar ads. Each advertising bid that’s fed to the model is then ranked among other bids based on its predicted performance. 

The machine learning model is trained to provide predictions on multiple kinds of relevant ad data, including both click-through rates and view-through rates. It’s also trained to reduce biases that typically come with real-world advertising data. 

Snap spent a lot of time in recent years overhauling its ad business, with CEO Evan Spiegel noting earlier this year that the company is “investing heavily” in AI to enhance its online ad platform. The company also wants to keep up with the rest of Big Tech on AI investment, with Spiegel claiming that Snap aims to spend $1.5 billion on the tech annually. 

If its recent earnings are any indication, the focus has paid off. Snap saw revenue grow 15% year-over-year in the third quarter, beating Wall Street’s estimates, and expects the hot streak to continue into the fourth quarter. The gains were largely attributed to digital ad performance, as well as growth of it’s Snapchat+ subscription service. 

Its consumer AI offerings also saw significant growth, as the number of messages sent to its My AI chatbot in the U.S. more than tripled quarter over quarter in the three months through September. 

But Snap isn’t the only one that got an uptick in the recent quarter. The digital ad market has rebounded sharply for Big Tech firms: Google saw a 10% uptick in digital ad revenue in the recent quarter, and Meta’s sales increased by 19% while profits jumped 35%.  Reddit saw advertising income grow 55% during the period. 

Though the earnings performance represents a victory for Snap, it still faces significant competition from the likes of Meta and TikTok as it fights for advertisers and user attention alike while seeking to keep up in the AI race.