Snap Bets on Ads, AR to Counter Competition

Snap Inc. CEO Evan Spiegel is striving to boost morale amidst a challenging year for the company, which has seen its stock price plummet by nearly 50%. In an internal letter obtained by Bloomberg, Spiegel reassured employees that Snap is on track for record annual revenue and remains committed to its augmented reality (AR) ambitions.

Addressing the elephant in the room, Spiegel acknowledged the stark contrast between the company's operational progress and its lackluster stock performance. "The answer is simple: our advertising business is growing slower than our competitors," he wrote, drawing a clear connection to rivals like Meta's Instagram and ByteDance's TikTok, both of which boast larger ad platforms and have enjoyed strong stock performances this year.

To counter this, Spiegel highlighted Snap's ongoing efforts to revamp its advertising platform, shifting its focus towards direct response ads that drive immediate user actions like app downloads and purchases. This strategic pivot, while initially resulting in a sales dip in 2023, has started to bear fruit, with direct response revenue increasing by 16% in the second quarter of this year.

Spiegel also revealed plans to further monetize the platform by introducing ads to the chat inbox and the popular map feature, marking the first time the real-time location sharing tool will be used for advertising.

The CEO reaffirmed Snap's commitment to AR technology, emphasizing the company's early mover advantage in the burgeoning market for AR glasses. "Unlike in digital advertising, where we were a late entrant in a market with established, scaled players, we are a leader in the market for this new type of glasses and in the development of our augmented reality platform," he stated. This comes ahead of Snap's annual partner summit later this month, where the company is widely expected to unveil a new iteration of its Spectacles AR glasses.

According to Bloomberg's data, Snap is projected to generate $5.35 billion in revenue this year, a 16% jump from a year ago.