Five Takeaways From SNAP’s Q3 2023 Earnings Report

10/24/23—SNAP beat earnings expectations today, although its stock price dropped on news that the war in the Middle East has affected ad demand. Here are 5 AI and machine learning takeaways that stood out for me from its Q3 2023:

1️⃣ MyAI is widely used—but it's not an everyday activity

Since launch, “more than 200 million people have sent over 20 billion messages, which we believe makes My AI one of the most used AI chatbots available today,” Snap said in its investor letter. But on the earnings call, CEO Evan Spiegel admitted that MyAI is more likely to be a weekly use case than a daily one. The company hopes its work on response quality will lead to more engagement.

2️⃣ MyAI is advertiser-friendly, but ads are a lower priority

In the investor letter, Snap called out food, dining, beauty, fitness, shopping, and gadgets as key topics where users are using MyAI "to receive real-world recommendations and learn about the world." But advertisers shouldn't expect a ton of new ad products in MyAI; that's much less of a priority for Snap than other near-term initiatives (like improving direct response) that can drive more substantial and sustainable revenue.

3️⃣ Generative AI can be a revenue generator in other ways, however

Snap started to roll out its generative AI selfie feature Dreams in Q3. The first few are free but more can be bought via in-app purchase, the investor letter stated.

4️⃣ Machine learning models are helping improve content ranking and personalization

Snap is continuing its investments in machine learning for these content ranking and personalization purposes, and “invested in building larger, more responsive, more sophisticated ranking models," the investor letter stated.

5️⃣ ML models are also helping improve ad performance

Machine learning models are helping Snap improve its ad ranking and optimization. That's helping it make "more precise predictions of conversions," the investor letter said. New models have also "led to a considerable improvement in ROI for advertisers and an increase in lower funnel revenue year-over-year and quarter-over-quarter," the letter said.