Snap Uses AI Chatbot to Refine Its Ad Business

Snap Inc., the maker of the Snapchat app, is testing ways that its popular new artificial intelligence chatbot can boost the company’s advertising business.

More than 150 million people — about 20 percent of Snapchat’s monthly users — have sent 10 billion messages to the chatbot, called My AI, since it was introduced at the end of February, the company said Thursday. Users have asked about everything from skin care recommendations to details about the latest sports car.

My AI, which calls itself the “virtual friend within Snapchat,” has already helped Snap diversify its revenue stream in a way many social media companies have struggled to do: through paid subscriptions. After the feature was first released to the app’s paying users, Snap’s total subscriber numbers rose to more than 3 million in April.

In what could be an even more lucrative boost to revenue, Snap is using what it has learned from the interactions with the chatbot to refine its advertising business, which provides the majority of the company’s revenue. Snap’s advertising has struggled, and the company reported its first-ever decline in sales in the first quarter. My AI was opened to all Snapchat users two months ago, and the influx of messages may help Snap improve the way it personalises ads.

Snap and its peers are still recovering from a change that Apple Inc. made to its privacy policies two years ago that drastically decreased the ability to track ads and target specific audiences on apps. That has forced social media companies to come up with new ways to learn about individual users’ interests based on their in-app activity.

Snapchat’s central feature is its private person-to-person messaging, giving the company little insight into a user’s activities. Instead, Snap mostly gleaned clues from the videos a person watched in the app’s publicly posted stories or Spotlight video feed. Now, Snap is beginning to use conversations with My AI to better target commercial messages based on users’ interests.

The Santa Monica, California-based company has also begun a test putting sponsored links from advertisers in conversations with My AI. That could eventually mean including a link to a product in a conversation about clothing or beauty, subjects which have already produced more than 28 million chats with My AI among users in the US, India, France and Great Britain, the company said.

Welcome to the Chatbot Age

Companies across industries have been excited by the prospect of generative AI since OpenAI released its ChatGPT chatbot. Many of the buzziest consumer-facing uses have been in the form of a chatbot, which converses in a human-sounding tone and spits out answers faster than a person can search for them on the internet. Alphabet Inc.’s Google on Wednesday announced new generative AI tools for shopping, aiding consumers in finding products, as well as for travel destinations.

Outside of the ad business, My AI’s conversations are also helping Snap refine its foundational ranking models — the algorithms used to show a given user the app’s most personalised content and lenses, as well as photo and video filters. The aim is to entice users to spend more time on the app.

“We see tremendous potential for My AI to improve the relevance of content we deliver to Snapchatters across the service, whether that means surfacing the right creator, AR experience, or mobile video from our advertising partners,” Rob Wilk, Snap’s president of Americas, said in an email.

Marketers are more likely to spend to put digital ads in front of users who they know may be interested in their products. Snap has already positioned My AI as a resource to ask for recommendations while informing users with a pop-up before chatting that the conversations may be used to personalise their Snapchat experience.

The conversations have gotten specific to interest areas and particular brands. Take cars, which have been talked about in more than 65 million chats, with nearly 8 million of those about specific brands, including BMW, Kia, Ford and Volkswagen. Or food, where McDonald’s has been the subject of 5 million chats with My AI.

By Alex Barinka

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